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CONFERENCE COMMITTEE REPORT ON H. F. No. 947

A bill for an actrelating to education finance; clarifying the calculation of general education aid;amending Minnesota Statutes 2016, section 126C.13, subdivision 4.

May 20, 2018The Honorable Kurt L. DaudtSpeaker of the House of Representatives

The Honorable Michelle L. FischbachPresident of the Senate

We, the undersigned conferees for H. F. No. 947 report that we have agreed upon the items in dispute and recommend as follows:

That the Senate recede from its amendment and that H. F. No. 947 be further amended as follows:

Delete everything after the enacting clause and insert:

"ARTICLE 1

K-12 EDUCATION

Section 1.

Subd. 2.

Additional revenues; priority.

(a) If on the basis of a forecast of general fund revenues and expenditures, the commissioner of management and budget determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium, the commissioner of management and budget must allocate money to the following accounts and purposes in priority order:

(1) the cash flow account established in subdivision 1 until that account reaches $350,000,000;

(3) the amount necessary to increase the aid payment schedule for school district aids and credits payments in section 127A.45 to not more than 90 percent rounded to the nearest tenth of a percent without exceeding the amount available and with any remaining funds deposited in the budget reserve;new text begin andnew text end

(4) the amount necessary to restore all or a portion of the net aid reductions under section 127A.441 and to reduce the property tax revenue recognition shift under section 123B.75, subdivision 5, by the same amountdeleted text begin; anddeleted text end

deleted text begin(5) the clean water fund established in section 114D.50 until $22,000,000 has been transferred into the funddeleted text end.

(b) The amounts necessary to meet the requirements of this section are appropriated from the general fund within two weeks after the forecast is released or, in the case of transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations schedules otherwise established in statute.

(c) The commissioner of management and budget shall certify the total dollar amount of the reductions under paragraph (a), clauses (3) and (4), to the commissioner of education. The commissioner of education shall increase the aid payment percentage and reduce the property tax shift percentage by these amounts and apply those reductions to the current fiscal year and thereafter.

deleted text begin(d) Paragraph (a), clause (5), expires after the entire amount of the transfer has been made.deleted text end

To the extent extra funds remain, staff development revenue may be used for staff development plans, including plans for challenging instructional activities and experiences under section 122A.60, and for curriculum development and programs, other in-service education, teachers' mentoring under section 122A.70 and evaluation, teachers' workshops, teacher conferences, the cost of substitute teachers for staff development purposes, preservice and in-service education for special education professionals and paraprofessionals, and other related costs for staff development efforts. A district may annually waive the requirement to reserve their basic revenue under this section if a majority vote of the licensed teachers in the district and a majority vote of the school board agree to a resolution to waive the requirement. A district in statutory operating debt is exempt from reserving basic revenue according to this section. Districts may expend an additional amount of unreserved revenue for staff development based on their needs.

new text begin(b) Notwithstanding paragraph (a), for fiscal year 2019 only, a school board may on its own accord adopt a written resolution waiving the two percent reserve for staff development or establishing a different percentage reserve.new text end

Sec. 3. new text beginONETIME COMPENSATION AND SCHOOL AID.new text end

new text beginSubdivision 1.new text end

new text beginTemporary reduction.new text end

new text begin$50,000,000 in fiscal year 2019 is transferred from the budget reserve under Minnesota Statutes, section 16A.152, subdivision 1a, to the general fund.new text end

new text beginSubd. 2.new text end

new text begin$50,000,000 in fiscal year 2019 is appropriated from the general fund to the commissioner of education for payment to schools under subdivision 3 for past activities conducted on school trust lands that did not maximize deposits to the permanent school trust fund as specified under Minnesota Statutes, section 84.027, subdivision 18, paragraph (b).new text end

new text beginSubd. 3.new text end

new text beginStudent and school safety aid.new text end

new text begin(a) For fiscal year 2019 only, concurrent with the September 2018 apportionment from the school endowment fund to each school district and charter school under Minnesota Statutes, section 127A.33, the commissioner must distribute student and school safety aid equal to $57.73 times the adjusted average daily membership for the previous school year.new text end

new text begin(b) The state aid received under this section may be used for student and staff safety activities consistent with Minnesota Statutes, section 126C.44, or for any other school-related purpose as deemed appropriate by the board.new text end

new text begin(a) On June 30, 2018, and June 30, 2019, upon approval of the commissioner of education and notwithstanding Minnesota Statutes, section 123B.79, 123B.80, or 124D.20, subdivision 10, a school district may permanently transfer any amount approved by the commissioner from its community education reserve fund balance to its undesignated general fund.new text end

new text begin(b) To the extent practicable, when making the fund transfer under this section, each school district must abide by its board's fund balance policy, unless the funds are transferred for an eligible use under Minnesota Statutes, section 124D.18.new text end

new text begin(c) A school district requesting a fund transfer under this section must apply for the transfer in the form and manner specified by the commissioner.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

ARTICLE 2

FEDERAL TAX CONFORMITY

Section 1.

Subd. 5.

Debt.

(a) "Debt" means a legal obligation of a natural person to pay a fixed and certain amount of money, which equals or exceeds $25 and which is due and payable to a claimant agency. The term includes criminal fines imposed under section 609.10 or 609.125, fines imposed for petty misdemeanors as defined in section 609.02, subdivision 4a, and restitution. A debt may arise under a contractual or statutory obligation, a court order, or other legal obligation, but need not have been reduced to judgment.

A debt includes any legal obligation of a current recipient of assistance which is based on overpayment of an assistance grant where that payment is based on a client waiver or an administrative or judicial finding of an intentional program violation; or where the debt is owed to a program wherein the debtor is not a client at the time notification is provided to initiate recovery under this chapter and the debtor is not a current recipient of food support, transitional child care, or transitional medical assistance.

(b) A debt does not include any legal obligation to pay a claimant agency for medical care, including hospitalization if the income of the debtor at the time when the medical care was rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of deleted text begin$12,560deleted text endnew text begin$13,180 new text endor less;

(2) for a debtor with one dependent, an income of deleted text begin$16,080deleted text endnew text begin$16,878 new text endor less;

(3) for a debtor with two dependents, an income of deleted text begin$19,020deleted text endnew text begin$19,959 new text endor less;

(4) for a debtor with three dependents, an income of deleted text begin$21,580deleted text endnew text begin$22,643 new text endor less;

(5) for a debtor with four dependents, an income of deleted text begin$22,760deleted text endnew text begin$23,887 new text endor less; and

(6) for a debtor with five or more dependents, an income of deleted text begin$23,730deleted text endnew text begin$24,900 new text endor less.

For purposes of this paragraph, "debtor" means the individual whose income, together with the income of the individual's spouse, other than a separated spouse, brings the individual within the income provisions of this paragraph. For purposes of this paragraph, a spouse, other than a separated spouse, shall be considered a dependent.

(c) The commissioner shall adjust the income amounts in paragraph (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2014"deleted text endnew text begin"2017" new text endshall be substituted for the word deleted text begin"1992." deleted text enddeleted text beginFor 2016, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2014, to the 12 months ending on August 31, 2015, and in each subsequent year, from the 12 months ending on August 31, 2014, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14. The income amount as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

(d) Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the dollar amount of the premium authorized under section 256L.15, subdivision 1a.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 3.

Subdivision 1.

Generally; individuals.

(a) A taxpayer must file a return for each taxable year the taxpayer is required to file a return under section 6012 of the Internal Revenue Codenew text begin or meets the requirements under paragraph (d) to file a returnnew text end, except that:

(1) an individual who is not a Minnesota resident for any part of the year is not required to file a Minnesota income tax return if the individual's gross income derived from Minnesota sources as determined under sections 290.081, paragraph (a), and 290.17, is less than the filing requirements for a single individual who is a full year resident of Minnesota; deleted text beginanddeleted text end

(2) an individual who is a Minnesota resident is not required to file a Minnesota income tax return if the individual's gross income derived from Minnesota sources as determined under section 290.17, less the subtractions allowed under section 290.0132, subdivisions 12 and 15, is less than the filing requirements for a single individual who is a full-year resident of Minnesota.

(b) The decedent's final income tax return, and other income tax returns for prior years where the decedent had gross income in excess of the minimum amount at which an individual is required to file and did not file, must be filed by the decedent's personal representative, if any. If there is no personal representative, the return or returns must be filed by the transferees, as defined in section 270C.58, subdivision 3, who receive property of the decedent.

(c) The term "gross income," as it is used in this section, has the same meaning given it in section 290.01, subdivision 20.

new text begin(d) The commissioner of revenue shall annually determine the gross income levels at which individuals are required to file a return for each taxable year based on the amounts that may be deducted under section 290.0803 and the personal and dependent exemptions under section 290.0138.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 4.

Subd. 7.

Composite income tax returns for nonresident partners, shareholders, and beneficiaries.

(a) The commissioner may allow a partnership with nonresident partners to file a composite return and to pay the tax on behalf of nonresident partners who have no other Minnesota source income. This composite return must include the names, addresses, Social Security numbers, income allocation, and tax liability for the nonresident partners electing to be covered by the composite return.

(b) The computation of a partner's tax liability must be determined by multiplying the income allocated to that partner by the highest rate used to determine the tax liability for individuals under section 290.06, subdivision 2c. Nonbusiness deductions, standard deductions, or personal exemptions are not allowed.

(c) The partnership must submit a request to use this composite return filing method for nonresident partners. The requesting partnership must file a composite return in the form prescribed by the commissioner of revenue. The filing of a composite return is considered a request to use the composite return filing method.

(d) The electing partner must not have any Minnesota source income other than the income from the partnership and other electing partnerships. If it is determined that the electing partner has other Minnesota source income, the inclusion of the income and tax liability for that partner under this provision will not constitute a return to satisfy the requirements of subdivision 1. The tax paid for the individual as part of the composite return is allowed as a payment of the tax by the individual on the date on which the composite return payment was made. If the electing nonresident partner has no other Minnesota source income, filing of the composite return is a return for purposes of subdivision 1.

(e) This subdivision does not negate the requirement that an individual pay estimated tax if the individual's liability would exceed the requirements set forth in section 289A.25. The individual's liability to pay estimated tax is, however, satisfied when the partnership pays composite estimated tax in the manner prescribed in section 289A.25.

(f) If an electing partner's share of the partnership's gross income from Minnesota sources is less than the filing requirements for a nonresident under this subdivision, the tax liability is zero. However, a statement showing the partner's share of gross income must be included as part of the composite return.

(g) The election provided in this subdivision is only available to a partner who has no other Minnesota source income and who is either (1) a full-year nonresident individual or (2) a trust or estate that does not claim a deduction under either section 651 or 661 of the Internal Revenue Code.

(h) A corporation defined in section 290.9725 and its nonresident shareholders may make an election under this paragraph. The provisions covering the partnership apply to the corporation and the provisions applying to the partner apply to the shareholder.

(i) Estates and trusts distributing current income only and the nonresident individual beneficiaries of the estates or trusts may make an election under this paragraph. The provisions covering the partnership apply to the estate or trust. The provisions applying to the partner apply to the beneficiary.

(j) For the purposes of this subdivision, "income" means the partner's share of federal adjusted gross income from the partnership modified by the additions provided in section 290.0131, subdivisions 8 to deleted text begin11deleted text endnew text begin 10 and 17new text end, and the subtractions provided in: (1) section 290.0132, subdivision 9, to the extent the amount is assignable or allocable to Minnesota under section 290.17; and (2) section 290.0132, subdivision 14. The subtraction allowed under section 290.0132, subdivision 9, is only allowed on the composite tax computation to the extent the electing partner would have been allowed the subtraction.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 5.

Subd. 14.

Reporting exempt interest and exempt-interest dividends.

(a) A regulated investment company paying $10 or more in exempt-interest dividends to an individual who is a resident of Minnesota, or any person receiving $10 or more of exempt interest or exempt-interest dividends and paying as nominee to an individual who is a resident of Minnesota, must make a return indicating the amount of the exempt interest or exempt-interest dividends, the name, address, and Social Security number of the recipient, and any other information that the commissioner specifies. The return must be provided to the recipient by February 15 of the year following the year of the payment. The return provided to the recipient must include a clear statement, in the form prescribed by the commissioner, that the exempt interest or exempt-interest dividends must be included in the computation of Minnesota taxable income. By June 1 of each year, the payer must file a copy of the return with the commissioner.

(b) For purposes of this subdivision, the following definitions apply.

(1) "Exempt-interest dividends" mean exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, but does not include the portion of exempt-interest dividends that are not required to be added to federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income under section 290.0131, subdivision 2, paragraph (b).

(2) "Regulated investment company" means regulated investment company as defined in section 851(a) of the Internal Revenue Code or a fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code.

(3) "Exempt interest" means income on obligations of any state other than Minnesota, or a political or governmental subdivision, municipality, or governmental agency or instrumentality of any state other than Minnesota, and exempt from federal income taxes under the Internal Revenue Code or any other federal statute.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 6.

Minnesota Statutes 2016, section 289A.20, is amended by adding a subdivision to read:

new text beginSubd. 1a.new text end

new text beginTax on deferred foreign income; election to pay in installments.new text end

new text begin(a) A taxpayer subject to tax under section 290.06, subdivision 1, may elect to pay the net tax liability on the deferred foreign income in installments in the same percentages of the net tax liability for each taxable year as provided in section 965(h)(1) of the Internal Revenue Code. Payment of an installment for a taxable year is due on the due date, determined without regard to any extensions of time for filing the return, for the tax return for that taxable year.new text end

new text begin(b) If an acceleration of payment applies for federal income tax purposes under section 965(h)(3) of the Internal Revenue Code, the unpaid portion of the remaining installments due under chapter 290 must be paid on the same date as the federal tax is due. Assessment of deficiencies must be prorated as provided under section 965(h)(4) of the Internal Revenue Code.new text end

new text begin(c) For purposes of determining date and time limits under sections 270C.62, 270C.63, 270C.67, and 270C.68, the date on which an installment is due under paragraph (a), including any acceleration under paragraph (b), must be treated as the assessment date, due date, or other date from which the time limit must be determined for that payment.new text end

new text begin(d) For purposes of this subdivision, "net tax liability" means the excess of:new text end

new text begin(1) the tax liability, determined under chapter 290, for the taxable year in which the deferred foreign income was includible in federal taxable income; overnew text end

new text begin(2) the tax liability, determined under chapter 290, for that taxable year computed after excluding the deferred foreign income under section 965 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 7.

289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of new text beginfederal adjusted gross income, new text endfederal taxable income, items of federal tax preferences, or federal credit amounts to make them conform with the provisions of chapter 290 or section 298.01. If a return has been filed, the commissioner shall enter the liability reported on the return and may make any audit or investigation that is considered necessary.

(b) Upon petition by a taxpayer, and when the commissioner determines that it is in the best interest of the state, the commissioner may allow S corporations and partnerships to receive orders of assessment issued under section 270C.33, subdivision 4, on behalf of their owners, and to pay liabilities shown on such orders. In such cases, the owners' liability must be calculated using the method provided in section 289A.08, subdivision 7, paragraph (b).

(c) A taxpayer may petition the commissioner for the use of the method described in paragraph (b) after the taxpayer is notified that an audit has been initiated and before an order of assessment has been issued.

(d) A determination of the commissioner under paragraph (b) to grant or deny the petition of a taxpayer cannot be appealed to the Tax Court or any other court.

(e) The commissioner may audit and adjust the taxpayer's computation of tax under chapter 291. In the case of a return filed pursuant to section 289A.10, the commissioner shall notify the estate no later than nine months after the filing date, as provided by section 289A.38, subdivision 2, whether the return is under examination or the return has been processed as filed.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 8.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 14a.new text end

new text beginSurviving spouse.new text end

new text beginThe term "surviving spouse" means an individual who is a surviving spouse under section 2(a) of the Internal Revenue Code for the taxable year.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 9.

Subd. 19.

Net income.

new text begin(a) For a corporation taxable under section 290.02, and an estate or a trust taxable under section 290.03, new text endthe term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in sections 290.0131 to 290.0136.

new text begin(b) For an individual, the term "net income" means federal adjusted gross income with the modifications provided in sections 290.0131, 290.0132, and 290.0135 to 290.0137.new text end

new text begin(c) new text endIn the case of a regulated investment company or a fund thereof, as defined in section 851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue Code must be applied by allowing a deduction for capital gain dividends and exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code; and

(3) the deduction for dividends paid must also be applied in the amount of any undistributed capital gains which the regulated investment company elects to have treated as provided in section 852(b)(3)(D) of the Internal Revenue Code.

new text begin(d) new text endThe net income of a real estate investment trust as defined and limited by section 856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

new text begin(e) new text endThe net income of a designated settlement fund as defined in section 468B(d) of the Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal Revenue Code.

new text begin(f) new text endThe Internal Revenue Code of 1986, as amended through deleted text beginDecember 16, 2016deleted text endnew text begin March 31, 2018new text end, shall be in effect for taxable years beginning after December 31, 1996.

new text begin(g) new text endExcept as otherwise provided, references to the Internal Revenue Code in this subdivision and sections 290.0131 to 290.0136 mean the code in effect for purposes of determining net income for the applicable year.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment, except the changes incorporated by federal changes are effective retroactively at the same time as the changes were effective for federal purposes and the changes amending the new paragraph (a) and adding paragraph (b) are effective for taxable years beginning after December 31, 2017.new text end

Sec. 10.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 19i.new text end

new text beginDeferred foreign income.new text end

new text begin"Deferred foreign income" means the income of a domestic corporation that is included in net income under section 965 of the Internal Revenue Code, inclusive of the deduction allowed under section 965(c) of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 11.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 21a.new text end

new text beginThe terms "adjusted gross income" and "federal adjusted gross income" mean adjusted gross income, as defined in section 62 of the Internal Revenue Code, as amended through the date named in subdivision 19, incorporating the federal effective date of changes to the Internal Revenue Code and any elections made by the taxpayer under the Internal Revenue Code in determining federal adjusted gross income for federal income tax purposes.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

new text begin(1) changes to itemized deductions made by Public Law 115-97, but including the changes made by sections 11027, 13704, and 13705 of that public law; andnew text end

new text begin(2) the federal itemized deduction of income or sales taxes under section 164 of the Internal Revenue Code.new text end

new text begin(b) For an individual who is not a resident of this state for the entire taxable year, the itemized deductions allowable under paragraph (a) are further limited as follows:new text end

new text begin(1) the taxes paid deduction under section 164 of the Internal Revenue Code applies only to real and personal property taxes imposed by this state or its political subdivisions;new text end

new text begin(2) the charitable contribution deduction under section 170 of the Internal Revenue Code does not apply;new text end

new text begin(3) the interest deduction under section 163 of the Internal Revenue Code is limited to:new text end

new text begin(i) interest paid on loans secured by a mortgage or lien on a residence located in this state; andnew text end

new text begin(ii) interest paid or accrued on indebtedness properly allocable to property held for investment located in this state;new text end

new text begin(iii) taxes paid to this state or its political subdivisions; andnew text end

new text begin(5) the deduction for losses under section 165 of the Internal Revenue Code is limited to losses attributable to property located in this state.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 13.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 29b.new text end

new text beginState standard deduction.new text end

new text begin"State standard deduction" means the federal standard deduction computed under section 63(c) and (f) of the Internal Revenue Code, as amended through December 16, 2016, except that for purposes of adjusting the amounts under this subdivision, the provisions of section 1(f) of the Internal Revenue Code, as amended through March 31, 2018, apply.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 14.

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text beginDecember 16, 2016deleted text endnew text begin March 31, 2018new text end. Internal Revenue Code also includes any uncodified provision in federal law that relates to provisions of the Internal Revenue Code that are incorporated into Minnesota law. When used in this chapter, the reference to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the Internal Revenue Code as amended through March 18, 2010.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and applies to the same taxable years as the changes incorporated by federal changes are effective for federal purposes, including any provisions that are retroactive to taxable years beginning after December 31, 2016.new text end

Sec. 15.

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "addition" means an amount that must be added to federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end incomenew text begin, or for estates and trusts, federal taxable income,new text end in computing net income for the taxable year to which the amounts relate.

(b) The additions in this section apply to individuals, estates, and trusts.

(c) Unless specifically indicated or unless the context clearly indicates otherwise, only amounts that were deducted or excluded in computing federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end incomenew text begin, or for estates and trusts, federal taxable income,new text end are an addition under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 16.

Subd. 3.

Income, sales and use, motor vehicle sales, or excise taxes paid.

deleted text begin(a)deleted text endnew text begin For trusts and estates,new text end the amount of income, sales and use, motor vehicle sales, or excise taxes paid or accrued within the taxable year under this chapter and the amount of taxes based on net income, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada is an addition to the extent deducted under section 63(d) of the Internal Revenue Code.

deleted text begin(b) The addition under paragraph (a) may not be more than the amount by which the state itemized deduction exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code. For the purpose of this subdivision, income, sales and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed under subdivision 12.deleted text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 17.

Subd. 10.

Section 179 expensing.

new text beginEffective for property placed in service in taxable years beginning before January 1, 2018, new text end80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 18.

Subd. 12.

Disallowed itemized deductions.

(a) The amount of disallowed itemized deductions is an addition. The amount of disallowed itemized deductionsdeleted text begin, plus the addition required under subdivision 3,deleted text end may not be more than the amount by which thenew text begin statenew text end itemized deductionsdeleted text begin, as allowed under section 63(d) of the Internal Revenue Code,deleted text end exceeds the amount of the new text beginstate new text endstandard deduction deleted text beginas defined in section 63(c) of the Internal Revenue Codedeleted text end.

(b) The amount of disallowed itemized deductions is equal to the lesser of:

(1) three percent of the excess of the taxpayer's federal adjusted gross income over the applicable amount; or

(2) 80 percent of the amount of the new text beginstate new text enditemized deductions otherwise allowable to the taxpayer under the Internal Revenue Code for the taxable year.

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code for the calendar year in which the taxable year begins, by substituting deleted text begin"calendar year 1990" for "calendar year 1992" in subparagraph (B) of section 1(f)(3)deleted text endnew text begin "2017" for "2016" in section 1(f)(3) of the Internal Revenue Codenew text end.

(d) "Itemized deductions" excludes:

(1) the deduction for medical expenses under section 213 of the Internal Revenue Code;

(2) any deduction for investment interest as defined in section 163(d) of the Internal Revenue Code; and

(3) the deduction under section 165(a) of the Internal Revenue Code for casualty or theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue Code or for losses described in section 165(d) of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(c) For a married individual filing a separate return, "applicable percentage" means two percentage points for each $1,250, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount. For all other filers, applicable percentage means two percentage points for each $2,500, or fraction of that amount, by which the taxpayer's federal adjusted gross income for the taxable year exceeds the threshold amount. The applicable percentage must not exceed 100 percent.

(2) the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code for the calendar year in which the taxable year begins, by substituting deleted text begin"calendar year 1990" for "calendar year 1992" in subparagraph (B) of section 1(f)(3)deleted text endnew text begin "2017" for "2016" in section 1(f)(3) of the Internal Revenue Codenew text end.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 20.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 15.new text end

new text beginQualified business income addition.new text end

new text beginFor a trust or estate, the amount deducted under section 199A of the Internal Revenue Code in computing the federal taxable income of the trust or estate is an addition.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 21.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 16.new text end

new text beginForeign-derived intangible income.new text end

new text beginThe amount of foreign-derived intangible income deducted under section 250 of the Internal Revenue Code for the taxable year is an addition.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 22.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision to read:

new text beginSubd. 17.new text end

new text begin529 plan distributions for K-12 expenses.new text end

new text beginThe lesser of the following amounts is an addition:new text end

new text begin(1) the total distributions for the taxable year from a qualified plan under section 529 of the Internal Revenue Code, owned by the taxpayer, that are expended for qualified higher education expenses under section 529(c)(7) of the Internal Revenue Code (expenses for tuition for elementary or secondary public, private, or religious school); ornew text end

new text begin(2) the total amount required to be reported to the taxpayer by any trustee of a qualified tuition plan under section 529 of the Internal Revenue Code as earnings on Internal Revenue Service Form 1099Q for the taxable year.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 23.

Subdivision 1.

Definition; scope.

(a) For the purposes of this section, "subtraction" means an amount that deleted text beginshalldeleted text endnew text begin is allowed tonew text end be subtracted from federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text endincomenew text begin, or for estates and trusts, federal taxable income,new text end in computing net income for the taxable year to which the amounts relate.

(b) The subtractions in this section apply to individuals, estates, and trusts.

new text beginEFFECTIVE DATE.new text end

Sec. 24.

Subd. 7.

Charitable contributions for taxpayers who do not itemize.

deleted text beginTo the extent not deducted or not deductible under section 408(d)(8)(E) of the Internal Revenue Code in determining federal taxable income bydeleted text endnew text begin Fornew text enddeleted text beginandeleted text endnew text begina residentnew text end individual who does not itemize deductions deleted text beginfor federal income tax purposesdeleted text endnew text begin under section 290.0803new text end for the taxable year, an amount equal to 50 percent of the excess of charitable contributions over $500 allowable as a deduction for the taxable year under section deleted text begin170(a) of the Internal Revenue Codedeleted text endnew text begin290.0803, subdivision 5,new text end is a subtraction.new text begin The subtraction under this subdivision must not include a distribution that is excluded from federal adjusted gross income and that is not deductible under section 408(d)(8)(E) of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 25.

Subd. 20.

deleted text beginThe amount of the phaseout of personal exemptions under section 151(d) of the Internal Revenue Code is a subtraction.deleted text endnew text beginThe amount of personal and dependent exemptions calculated under section 290.0138 is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 26.

Subd. 21.

Military service pension; retirement pay.

To the extent included in federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income, compensation received from a pension or other retirement pay from the federal government for service in the military, as computed under United States Code, title 10, sections 1401 to 1414, 1447 to 1455, and 12733, is a subtraction. The subtraction is limited to individuals who do not claim the credit under section 290.0677.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 27.

Subd. 26.

Social Security benefits.

(a) A portion of Social Security benefits is allowed as a subtraction. The subtraction equals the lesser of Social Security benefits or a maximum subtraction subject to the limits under paragraphs (b), (c), and (d).

(b) For married taxpayers filing a joint return and surviving spouses, the maximum subtraction equals deleted text begin$4,500deleted text endnew text begin $4,590new text end. The maximum subtraction is reduced by 20 percent of provisional income over deleted text begin$77,000deleted text endnew text begin $78,530new text end. In no case is the subtraction less than zero.

(c) For single or head-of-household taxpayers, the maximum subtraction equals deleted text begin$3,500deleted text endnew text begin$3,570new text end. The maximum subtraction is reduced by 20 percent of provisional income over deleted text begin$60,200deleted text endnew text begin $61,400new text end. In no case is the subtraction less than zero.

(d) For married taxpayers filing separate returns, the maximum subtraction equals deleted text begin$2,250deleted text endnew text beginone-half the maximum subtraction for joint returns under paragraph (b)new text end. The maximum subtraction is reduced by 20 percent of provisional income over deleted text begin$38,500deleted text endnew text begin one-half the maximum subtraction for joint returns under paragraph (b)new text end. In no case is the subtraction less than zero.

(e) For purposes of this subdivision, "provisional income" means modified adjusted gross income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of the Social Security benefits received during the taxable year, and "Social Security benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

(f) The commissioner shall adjust the maximum subtraction and threshold amounts in paragraphs (b) to (d) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end of the Internal Revenue Code the word deleted text begin"2016"deleted text endnew text begin "2017"new text end shall be substituted for the word deleted text begin"1992." For 2018, the commissioner shall then determine the percentage change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016." new text endThe determination of the commissioner pursuant to this subdivision must not be considered a rule and is not subject to the Administrative Procedure Act contained in chapter 14, including section 14.386. The maximum subtraction and threshold amounts as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 28.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 27.new text end

new text beginMoving expenses.new text end

new text beginExpenses that qualify as a deduction under section 217(a) through (f) of the Internal Revenue Code, disregarding paragraph (k), are a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 29.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 28.new text end

new text beginGlobal intangible low-taxed income.new text end

new text beginThe taxpayer's global intangible low-taxed income included under section 951A of the Internal Revenue Code for the taxable year is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 30.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 29.new text end

new text beginDeferred foreign income of nonresidents.new text end

new text beginFor a nonresident individual, the amount of deferred foreign income recognized because of section 965 of the Internal Revenue Code is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 31.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 30.new text end

new text beginStandard or itemized deduction.new text end

new text beginThe amount allowed under section 290.0803 is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 32.

Subd. 6.

Special deductions.

new text begin(a) new text endThe amount of any special deductions under sections 241 to 247 new text beginof the Internal Revenue Code new text endand deleted text begin965deleted text endnew text beginthe amount of foreign derived intangible income deducted under section 250 new text endof the Internal Revenue Code is an addition.

new text begin(b) The addition under this subdivision is reduced by the amount of the deduction under section 245A of the Internal Revenue Code that represents amounts included in federal taxable income in a prior taxable year under section 965 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 33.

Subd. 12.

Section 179 expensing.

new text beginEffective for property placed in service in taxable years beginning before January 1, 2018, new text end80 percent of the amount by which the deduction allowed under the dollar limits of section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code, as amended through December 31, 2003, is an addition.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 34.

Minnesota Statutes 2016, section 290.0134, is amended by adding a subdivision to read:

new text beginSubd. 17.new text end

new text beginGlobal intangible low-taxed income.new text end

new text beginThe taxpayer's global intangible low-taxed income included under section 951A of the Internal Revenue Code for the taxable year is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 35.

Minnesota Statutes 2016, section 290.0136, is amended to read:

290.0136 CERTAIN PREFERRED STOCK LOSSES.

A taxpayer must compute net income by treating losses from the sale or transfer of certain preferred stock, which the taxpayer treated as ordinary losses pursuant to Division A, title III, section 301 of Public Law 110-343, as capital losses. The amount of net income under section 290.01, subdivision 19; taxable net income under section 290.01, subdivision 22; taxable income under section 290.01, subdivision 29; the numerator and denominator in section 290.06, subdivision 2c, paragraph (e); individual alternative minimum taxable income under section 290.091, subdivision 2; deleted text begincorporate alternative minimum taxable income under section 290.0921, subdivision 3;deleted text end and net operating losses under section 290.095 must be computed for each taxable year as if those losses had been treated by the taxpayer as capital losses under the Internal Revenue Code, including the limitations under section 1211 of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 36.

new text begin[290.0138] PERSONAL AND DEPENDENT EXEMPTIONS.new text end

new text beginSubdivision 1.new text end

new text beginPersonal and dependent exemptions.new text end

new text begin(a) A taxpayer is allowed (1) a personal exemption in the amount of $4,150, and in the case of a married couple filing a joint return an additional personal exemption of $4,150; plus (2) a dependent exemption of $4,150 multiplied by the number of dependents of the taxpayer, as defined under sections 151 and 152 of the Internal Revenue Code.new text end

new text begin(b) The personal and dependent exemptions are not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 or 152 of the Internal Revenue Code, by another taxpayer.new text end

new text beginSubd. 2.new text end

new text beginCost-of-living adjustment.new text end

new text beginFor taxable years beginning after December 31, 2018, the commissioner shall annually adjust the amounts in subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code as amended through March 31, 2018. The exemption amount as adjusted for inflation must be rounded to the nearest $50. If the amount is not a multiple of $50, the commissioner shall round down to the next lowest multiple of $50. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 37.

Subd. 2.

Computation.

The amount of tax imposed by subdivision 1 shall be computed in the same way as the tax imposed under section 402(d) of the Internal Revenue Code of 1986, as amended through December 31, 1995, except that the initial separate tax shall be an amount equal to five times the tax which would be imposed by section 290.06, subdivision 2c, if the recipient was an unmarried individual, and the taxable net income was an amount equal to one-fifth of the excess of

(i) the total taxable amount of the lump-sum distribution for the year, over

(ii) the minimum distribution allowance, and except that references in section 402(d) of the Internal Revenue Code of 1986, as amended through December 31, 1995, to paragraph (1)(A) thereof shall instead be references to subdivision 1, and the excess, if any, of the subtraction base amount over deleted text beginfederaldeleted text end taxablenew text begin netnew text end income for a qualified individual as provided under section 290.0802, subdivision 2.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 38.

Subd. 3.

Taxes imposed on exempt entities.

(a) An organization exempt from taxation under subdivision 2 shall, nevertheless, be subject to tax under this chapter to the extent provided in the following provisions of the Internal Revenue Code:

(1) section 527 (dealing with political organizations);

(2) section 528 (dealing with certain homeowners associations);

(3) sections 511 to 515 (dealing with unrelated business income);

(4) section 521 (dealing with farmers' cooperatives); and

(5) section 6033(e)(2) (dealing with lobbying expense); but notwithstanding this subdivision, shall be considered an organization exempt from income tax for the purposes of any law which refers to organizations exempt from income taxes.

(b) The tax shall be imposed on the taxable income of political organizations or homeowner associations or the unrelated business taxable income, as defined in section 512 of the Internal Revenue Code, of organizations defined in section 511 of the Internal Revenue Code, provided that the tax is not imposed on:

(1) advertising revenues from a newspaper published by an organization described in section 501(c)(4) of the Internal Revenue Code; or

(2) revenues from lawful gambling authorized under chapter 349 that are expended for purposes that qualify for the deduction for charitable contributions under section 170 of the Internal Revenue Code, disregarding the limitation under section 170(b)(2), but only to the extent the contributions are not deductible in computing federal taxable income.

The tax shall be at the corporate rates. The tax shall only be imposed on income and deductions assignable to this state under sections 290.17 to 290.20. To the extent deducted in computing federal taxable income, the deductions contained in section 290.21 shall not be allowed in computing Minnesota taxable net income.

(c) The tax shall be imposed on organizations subject to federal tax under section 6033(e)(2) of the Internal Revenue Code, in an amount equal to the corporate tax rate multiplied by the amount of lobbying expenses taxed under section 6033(e)(2) which are attributable to lobbying the Minnesota state government.

new text begin(d) In calculating unrelated business taxable income under section 512 of the Internal Revenue Code, the amount of any net operating loss deduction claimed under section 172 of the Internal Revenue Code is an addition. Taxpayers making an addition under this paragraph may deduct a net operating loss for the taxable year in the same manner as a corporation under section 290.095, in a form and manner prescribed by the commissioner, and may calculate the loss without the application of the limitation provided for under section 512(a)(6) of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 40.

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income taxes imposed by this chapter upon married individuals filing joint returns and surviving spouses deleted text beginas defined in section 2(a) of the Internal Revenue Codedeleted text end must be computed by applying to their taxable net income the following schedule of rates:

Married individuals filing separate returns, estates, and trusts must compute their income tax by applying the above rates to their taxable income, except that the income brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be computed by applying to taxable net income the following schedule of rates:

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as a head of household as defined in section 2(b) of the Internal Revenue Code must be computed by applying to taxable net income the following schedule of rates:

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax of any individual taxpayer whose taxable net income for the taxable year is less than an amount determined by the commissioner must be computed in accordance with tables prepared and issued by the commissioner of revenue based on income brackets of not more than $100. The amount of tax for each bracket shall be computed at the rates set forth in this subdivision, provided that the commissioner may disregard a fractional part of a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute the individual's Minnesota income tax as provided in this subdivision. After the application of the nonrefundable credits provided in this chapter, the tax liability must then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income deleted text beginas defined in section 62 of the Internal Revenue Codedeleted text end and increased by the additions required under section 290.0131, subdivisions 2deleted text beginanddeleted text endnew text begin,new text end 6 to deleted text begin11deleted text endnew text begin 10new text end, new text begin16, and 17, new text endand reduced by the Minnesota assignable portion of the subtraction for United States government interest under section 290.0132, subdivision 2, and the subtractions under section 290.0132, subdivisions 9, 10, 14, 15, 17, deleted text beginanddeleted text end 18, new text beginand 27 to 29, new text endafter applying the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

new text begin(f) For taxable years beginning after December 31, 2017, and before January 1, 2020, a rate of 5.3 percent applies instead of the 5.25 percent rate in paragraphs (a) to (c), and a rate of 6.95 percent applies instead of the 6.85 percent rate in paragraphs (a) to (c).new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 41.

Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after December 31, 2013, the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage determined under paragraph (b). deleted text beginFor the purpose of making the adjustment as provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate brackets as they existed for taxable years beginning after December 31, 2012, and before January 1, 2014.deleted text end The rate applicable to any rate bracket must not be changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2012"deleted text endnew text begin "2017"new text end shall be substituted for the word deleted text begin"1992." For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the specific percentage that will be used to adjust the tax rate brackets.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 42.

Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the dependent care credit for which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal Revenue Code except that in determining whether the child qualified as a dependent, income received as a Minnesota family investment program grant or allowance to or on behalf of the child must not be taken into account in determining whether the child received more than half of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of six years at the close of the taxable year is cared for at a licensed family day care home operated by the child's parent, the taxpayer is deemed to have paid employment-related expenses. If the child is 16 months old or younger at the close of the taxable year, the amount of expenses deemed to have been paid equals the maximum limit for one qualified individual under section 21(c) and (d) of the Internal Revenue Code. If the child is older than 16 months of age but has not attained the age of six years at the close of the taxable year, the amount of expenses deemed to have been paid equals the amount the licensee would charge for the care of a child of the same age for the same number of hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at the close of the taxable year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance program as defined in section 129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i) the combined earned income of the couple or (ii) the amount of the maximum limit for one qualified individual under section 21(c) and (d) of the Internal Revenue Code will be deemed to be the employment related expense paid for that child. The earned income limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed amount. These deemed amounts apply regardless of whether any employment-related expenses have been paid.

(d) If the taxpayer is not required and does not file a federal individual income tax return for the tax year, no credit is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number of the person are included on the return claiming the credit; or

(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name and address of the person are included on the return claiming the credit.

In the case of a failure to provide the information required under the preceding sentence, the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information required.

(e) In the case of a nonresident, part-year resident, or a person who has earned income not subject to tax under this chapter including earned income excluded pursuant to section 290.0132, subdivision 10, the credit determined under section 21 of the Internal Revenue Code must be allocated based on the ratio by which the earned income of the claimant and the claimant's spouse from Minnesota sources bears to the total earned income of the claimant and the claimant's spouse.

(f) For residents of Minnesota, the subtractions for military pay under section 290.0132, subdivisions 11 and 12, are not considered "earned income not subject to tax under this chapter."

(g) For residents of Minnesota, the exclusion of combat pay under section 112 of the Internal Revenue Code is not considered "earned income not subject to tax under this chapter."

(h) For taxpayers with federal adjusted gross income in excess of deleted text begin$50,000deleted text endnew text begin $50,990new text end, the credit is equal to the lesser of the credit otherwise calculated under this subdivision, or the amount equal to $600 minus five percent of federal adjusted gross income in excess of deleted text begin$50,000deleted text endnew text begin $50,990new text end for taxpayers with one qualified individual, or $1,200 minus five percent of federal adjusted gross income in excess of deleted text begin$50,000deleted text endnew text begin $50,990new text end for taxpayers with two or more qualified individuals, but in no case is the credit less than zero.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 43.

Subd. 2b.

Inflation adjustment.

The commissioner shall adjust the dollar amount of the income threshold at which the maximum credit begins to be reduced under subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2016"deleted text endnew text begin "2017"new text end shall be substituted for the word deleted text begin"1992." For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The determination of the commissioner pursuant to this subdivision must not be considered a "rule" and is not subject to the Administrative Procedure Act contained in chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 44.

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter equal to a percentage of earned income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code, except that a taxpayer with no qualifying children who has attained the age of 21, but not attained age 65 before the close of the taxable year and is otherwise eligible for a credit under section 32 of the Internal Revenue Code may also receive a credit.

(b) For individuals with no qualifying children, the credit equals 2.10 percent of the first deleted text begin$6,180deleted text endnew text begin $6,480new text end of earned income. The credit is reduced by 2.01 percent of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin$8,130deleted text endnew text begin $8,530new text end, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 9.35 percent of the first deleted text begin$11,120deleted text endnew text begin $11,670new text end of earned income. The credit is reduced by 6.02 percent of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin$21,190deleted text endnew text begin $22,340new text end, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals 11 percent of the first deleted text begin$18,240deleted text endnew text begin$19,130 new text endof earned income. The credit is reduced by 10.82 percent of earned income or adjusted gross income, whichever is greater, in excess of deleted text begin$25,130deleted text endnew text begin $26,360new text end, but in no case is the credit less than zero.

(e) For a part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year and has earned income not subject to tax under this chapter, including income excluded under section 290.0132, subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross income reduced by the earned income not subject to tax under this chapter over federal adjusted gross income. For purposes of this paragraph, the following clauses are not considered "earned income not subject to tax under this chapter":

(2) the exclusion of combat pay under section 112 of the Internal Revenue Code; and

(3) income derived from an Indian reservation by an enrolled member of the reservation while living on the reservation.

(g) For tax years beginning after December 31, deleted text begin2013deleted text endnew text begin 2018new text end, the deleted text begin$8,130deleted text endnew text begin $8,530new text end in paragraph (b), the deleted text begin$21,190deleted text endnew text begin $22,340new text end in paragraph (c), and the deleted text begin$25,130deleted text endnew text begin $26,360new text end in paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by deleted text begin$5,000deleted text endnew text begin$5,700 new text endfor married taxpayers filing joint returns. For tax years beginning after December 31, deleted text begin2013deleted text endnew text begin2018new text end, the commissioner shall annually adjust the deleted text begin$5,000deleted text endnew text begin $5,700new text end by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end, the word deleted text begin"2008"deleted text endnew text begin "2017"new text end shall be substituted for the word deleted text begin"1992." For 2014, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

(h) The commissioner shall construct tables showing the amount of the credit at various income levels and make them available to taxpayers. The tables shall follow the schedule contained in this subdivision, except that the commissioner may graduate the transition between income brackets.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 45.

Subd. 7.

Inflation adjustment.

The earned income amounts used to calculate the credit and the income thresholds at which the maximum credit begins to be reduced in subdivision 1 must be adjusted for inflation. The commissioner shall adjust by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2013"deleted text endnew text begin "2017"new text end shall be substituted for the word deleted text begin"1992." For 2015, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2013, to the 12 months ending on August 31, 2014, and in each subsequent year, from the 12 months ending on August 31, 2013, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The earned income thresholds as adjusted for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 46.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Long-term care insurance" means a policy that:

(1) qualifies for a deduction under section 213 of the Internal Revenue Code, disregarding the adjusted gross income test; or meets the requirements given in section 62A.46; or provides similar coverage issued under the laws of another jurisdiction; and

(2) has a lifetime long-term care benefit limit of not less than $100,000; and

(3) has been offered in compliance with the inflation protection requirements of section 62S.23.

(c) "Qualified beneficiary" means the taxpayer or the taxpayer's spouse.

new text beginEFFECTIVE DATE.new text end

Sec. 47.

Subd. 2.

Credit.

A taxpayer is allowed a credit against the tax imposed by this chapter for long-term care insurance policy premiums paid during the tax year. The credit for each policy equals 25 percent of premiums paid to the extent not deducted in determining deleted text beginfederaldeleted text endtaxablenew text begin netnew text end income. A taxpayer may claim a credit for only one policy for each qualified beneficiary. A maximum of $100 applies to each qualified beneficiary. The maximum total credit allowed per year is $200 for married couples filing joint returns and $100 for all other filers. For a nonresident or part-year resident, the credit determined under this section must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 48.

Subd. 2a.

Income.

(a) For purposes of this section, "income" means the sum of the following:

(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code;

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;

(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;

(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; deleted text beginanddeleted text end

(xvi) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Codedeleted text begin.deleted text endnew text begin; andnew text end

new text begin(xvii) alimony received to the extent not included in the recipient's income.new text end

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" means federal adjusted gross income reflected in the fiscal year ending in the next calendar year. Federal adjusted gross income may not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

(2) amounts of any pension or annuity that were exclusively funded by the claimant or spouse if the funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

(3) surplus food or other relief in kind supplied by a governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or final decree of dissolution or legal separation; and

(6) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 49.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Account" means the historic credit administration account in the special revenue fund.

(c) "Office" means the State Historic Preservation Office of the Department of Administration.

(d) "Project" means rehabilitation of a certified historic structure, as defined in section 47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is allowed a federal credit.

(e) "Federal credit" means the credit allowed under section deleted text begin47(a)(2)deleted text endnew text begin 47(a)new text end of the Internal Revenue Codenew text begin, except that the amount allowed is deemed to be allocated in the taxable year that the project is placed in servicenew text end.

(f) "Placed in service" has the meaning used in section 47 of the Internal Revenue Code.

(g) "Qualified rehabilitation expenditures" has the meaning given in section 47 of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 50.

Subd. 2.

Credit or grant allowed; certified historic structure.

(a) A credit is allowed against the tax imposed under this chapter equal to not more than 100 percent of the credit allowed under section deleted text begin47(a)(2)deleted text endnew text begin 47(a)new text end of the Internal Revenue Code for a project. new text beginThe credit is payable in an amount equal to one-fifth of the total credit amount allowed in the five taxable years beginning with the year the project is placed in service. new text endTo qualify for the credit:

(1) the project must receive Part 3 certification and be placed in service during the taxable year; and

(2) the taxpayer must be allowed the federal credit and be issued a credit certificate for the taxable year as provided in subdivision 4.

(b) The commissioner of administration may pay a grant in lieu of the credit. The grant equals 90 percent of the credit that would be allowed for the project.new text begin The grant is payable in an amount equal to one-fifth of 90 percent of the credit that would be allowed for the project in the five taxable years beginning with the year the project is placed in service.new text end

(c) In lieu of the credit under paragraph (a), an insurance company may claim a credit against the insurance premiums tax imposed under chapter 297I.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 51.

Subd. 3.

Applications; allocations.

(a) To qualify for a credit or grant under this section, the developer of a project must apply to the office before the rehabilitation begins. The application must contain the information and be in the form prescribed by the office. The office may collect a fee for application of up to 0.5 percent of qualified rehabilitation expenditures, up to $40,000, based on estimated qualified rehabilitation expenditures, to offset costs associated with personnel and administrative expenses related to administering the credit and preparing the economic impact report in subdivision 9. Application fees are deposited in the account. The application must indicate if the application is for a credit or a grant in lieu of the credit or a combination of the two and designate the taxpayer qualifying for the credit or the recipient of the grant.

(2) state the amount of credit or grant anticipated with the project, with the credit amount equal to 100 percent and the grant amount equal to 90 percent of the federal credit anticipated in the application;

(3) state that the credit or grant allowed may increase or decrease if the federal credit the project receives at the time it is placed in service is different than the amount anticipated at the time the allocation certificate is issued; and

(4) state the fiscal year in which the credit or grant is allocated, and that the taxpayer or grant recipient is entitled to receive new text beginone-fifth of the total amount of either new text endthe credit or new text beginthe new text endgrant at the time the project is placed in service, provided that date is within three calendar years following the issuance of the allocation certificate.

(c) The office, in consultation with the commissioner, shall determine if the project is eligible for a credit or a grant under this section and must notify the developer in writing of its determination. Eligibility for the credit is subject to review and audit by the commissioner.

(d) The federal credit recapture and repayment requirements under section 50 of the Internal Revenue Code do not apply to the credit allowed under this section.

(e) Any decision of the office under paragraph (c) may be challenged as a contested case under chapter 14. The contested case proceeding must be initiated within 45 days of the date of written notification by the office.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 52.

Subd. 4.

Credit certificates; grants.

(a)(1) The developer of a project for which the office has issued an allocation certificate must notify the office when the project is placed in service. Upon verifying that the project has been placed in service, and was allowed a federal credit, the office must issue a credit certificate to the taxpayer designated in the application or must issue a grant to the recipient designated in the application. The credit certificate must state the amount of the credit.

(2) The credit amount equals the federal credit allowed for the project.

(3) The grant amount equals 90 percent of the federal credit allowed for the project.

(b) The recipient of a credit certificate may assign the certificate to another taxpayernew text beginbefore the first one-fifth payment is claimednew text end, which is then allowed the credit under this section or section 297I.20, subdivision 3. An assignment is not valid unless the assignee notifies the commissioner within 30 days of the date that the assignment is made. The commissioner shall prescribe the forms necessary for notifying the commissioner of the assignment of a credit certificate and for claiming a credit by assignment.

(c) Credits passed through to partners, members, shareholders, or owners pursuant to subdivision 5 are not an assignment of a credit certificate under this subdivision.

(d) A grant agreement between the office and the recipient of a grant may allow the grant to be issued to another individual or entity.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for allocation certificates submitted after December 31, 2017.new text end

Sec. 53.

Subd. 2.

Credit allowed.

(a) An individual who is a resident of Minnesota is allowed a credit against the tax imposed by this chapter. The credit is not allowed to an individual who is eligible to be claimed as a dependent, as defined in sections 151 and 152 of the Internal Revenue Code. The credit may not exceed the liability for tax under this chapter.

(b) The amount of the credit allowed equals 50 percent of contributions for the taxable year. The maximum credit is $500, subject to the phaseout in paragraphs (c) and (d). In no case is the credit less than zero.

(c) For individual filers, the maximum credit is reduced by two percent of adjusted gross income in excess of deleted text begin$75,000deleted text endnew text begin $76,490new text end.

(d) For married couples filing a joint return, the maximum credit is phased out as follows:

(1) for married couples with adjusted gross income in excess of deleted text begin$75,000deleted text endnew text begin $76,490new text end, but not more than deleted text begin$100,000deleted text endnew text begin $101,990new text end, the maximum credit is reduced by one percent of adjusted gross income in excess of deleted text begin$75,000deleted text endnew text begin $76,490new text end;

(2) for married couples with adjusted gross income in excess of deleted text begin$100,000deleted text endnew text begin $101,990new text end, but not more than deleted text begin$135,000deleted text endnew text begin $137,680new text end, the maximum credit is $250; and

(e) The income thresholds in paragraphs (c) and (d) used to calculate the maximum credit must be adjusted for inflation. The commissioner shall adjust the income thresholds by the percentage determined under the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2016"deleted text endnew text begin "2017"new text end is substituted for the word deleted text begin"1992." For 2018, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2016, to the 12 months ending on August 31, 2017, and in each subsequent year, from the 12 months ending on August 31, 2016, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The income thresholds as adjusted for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not subject to chapter 14, including section 14.386.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 54.

Subd. 2.

Subtraction.

(a) A qualified individual is allowed a subtraction from federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income of the individual's subtraction base amount. The excess of the subtraction base amount over the taxable net income computed without regard to the subtraction for the elderly or disabled under section 290.0132, subdivision 5, may be used to reduce the amount of a lump sum distribution subject to tax under section 290.032.

(b)(1) The initial subtraction base amount equals

(i) $12,000 for a married taxpayer filing a joint return if a spouse is a qualified individual,

(ii) $9,600 for a single taxpayer, and

(iii) $6,000 for a married taxpayer filing a separate federal return.

(2) The qualified individual's initial subtraction base amount, then, must be reduced by the sum of nontaxable retirement and disability benefits and one-half of the amount of adjusted gross income in excess of the following thresholds:

(i) $18,000 for a married taxpayer filing a joint return if both spouses are qualified individuals,

(ii) $14,500 for a single taxpayer or for a married couple filing a joint return if only one spouse is a qualified individual, and

(iii) $9,000 for a married taxpayer filing a separate federal return.

(3) In the case of a qualified individual who is under the age of 65, the maximum amount of the subtraction base may not exceed the taxpayer's disability income.

(4) The resulting amount is the subtraction base amount.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 55.

new text begin[290.0803] STANDARD OR ITEMIZED DEDUCTION.new text end

new text beginSubdivision 1.new text end

new text beginElection.new text end

new text beginAn individual may elect to claim a state standard deduction in lieu of state itemized deductions. In the case of a married individual filing a separate return, if one spouse elects to claim state itemized deductions, the other spouse is not allowed a state standard deduction.new text end

new text beginSubd. 2.new text end

new text beginSubtraction.new text end

new text beginBased on the election under subdivision 1, individuals are allowed to subtract from federal adjusted gross income the state standard deduction or the state itemized deduction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue Code, with respect to each property (as defined in section 614 of the Internal Revenue Code), to the extent not included in federal alternative minimum taxable income, the excess of the deduction for depletion allowable under section 611 of the Internal Revenue Code for the taxable year over the adjusted basis of the property at the end of the taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the amount of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the amount of interest income as provided by section 290.0131, subdivision 2; and

(ii) an overpayment of state income tax as provided by section 290.0132, subdivision 3, to the extent included in federal alternative minimum taxable income;

(iii) the amount of investment interest paid or accrued within the taxable year on indebtedness to the extent that the amount does not exceed net investment income, as defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include amounts deducted in computing federal adjusted gross income;

new text begin(vi) the amount which would have been an allowable deduction under section 165(h) of the Internal Revenue Code, as amended through December 16, 2016, and which was taken as a Minnesota itemized deduction under section 290.01, subdivision 29new text end.

In the case of an estate or trust, alternative minimum taxable income must be computed as provided in section 59(c) of the Internal Revenue Codenew text begin, except that alternative minimum taxable income must be increased by the amount of the addition under section 290.0131, subdivision 15new text end.

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard to this section and section 290.032), reduced by the sum of the nonrefundable credits allowed under this chapter.

(b) The exemption amount determined under this subdivision is subject to the phase out under section deleted text begin55(d)(3)deleted text endnew text begin 55(d)(2)new text end of the Internal Revenue Code, except that alternative minimum taxable income as determined under this section must be substituted in the computation of the phase out.

(c) For taxable years beginning after December 31, deleted text begin2006deleted text endnew text begin 2018new text end, the exemption amount under paragraph (a) must be adjusted for inflation. The commissioner shall adjust the exemption amount by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2005"deleted text endnew text begin "2017"new text endshall be substituted for the word deleted text begin"1992." For 2007, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2005, to the 12 months ending on August 31, 2006, and in each subsequent year, from the 12 months ending on August 31, 2005, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin"2016."new text end The exemption amount as adjusted must be rounded to the nearest $10. If the amount ends in $5, it must be rounded up to the nearest $10 amount. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 58.

Subd. 8.

Carryover credit.

(a) A corporation is allowed a credit against qualified regular tax for qualified alternative minimum tax previously paid. The credit is allowable only deleted text beginif the corporation has no tax liability under this section for the taxable year anddeleted text end if the corporation has an alternative minimum tax credit carryover from a previous year. The credit allowable in a taxable year equals the lesser of

(c) The qualified alternative minimum tax for a taxable year is an alternative minimum tax credit carryover to each of the taxable years succeeding the taxable year. The entire amount of the credit must be carried to the earliest taxable year to which the amount may be carried. Any unused portion of the credit must be carried to the following taxable year. No credit may be carried to a taxable year in which alternative minimum tax was paid.

(d) An acquiring corporation may carry over this credit from a transferor or distributor corporation in a corporate acquisition. The provisions of section 381 of the Internal Revenue Code apply in determining the amount of the carryover, if any.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 59.

Subdivision 1.

Imposition.

(a) In addition to the tax imposed by this chapter without regard to this section, the franchise tax imposed on a corporation required to file under section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:

(b) A tax is imposed for each taxable year on a corporation required to file a return under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725and on a partnership required to file a return under section 289A.12, subdivision 3, other than a partnership that derives over 80 percent of its income from farming. The tax imposed under this paragraph is due on or before the due date of the return for the taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe the return to be used for payment of this tax. The tax under this paragraph is equal to the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:

(c) The commissioner shall adjust the dollar amounts of both the tax and the property, payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)deleted text begin(B)deleted text end the word deleted text begin"2012"deleted text endnew text begin "2017"new text end must be substituted for the word deleted text begin"1992." For 2014, the commissioner shall determine the percentage change from the 12 months ending on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent year, from the 12 months ending on August 31, 2012, to the 12 months ending on August 31 of the year preceding the taxable year.deleted text endnew text begin "2016."new text end The determination of the commissioner pursuant to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in chapter 14. The tax amounts as adjusted must be rounded to the nearest $10 amount and the threshold amounts must be adjusted to the nearest $10,000 amount. For tax amounts that end in $5, the amount is rounded up to the nearest $10 amount and for the threshold amounts that end in $5,000, the amount is rounded up to the nearest $10,000.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 60.

Subd. 4.

Computation and modifications.

The following modifications shall be made in computing a net operating loss in any taxable year and also in computing the taxable net income for any taxable year before a net operating loss deduction shall be allowed:

(a) No deduction shall be allowed for or with respect to losses connected with income producing activities if the income therefrom would not be required to be either assignable to this state or included in computing the taxpayer's taxable net income.

(b) A net operating loss deduction shall not be allowed.

(c) The amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includable on account of gains from sales or exchanges of capital assets.

(d) Renegotiation of profits for a prior taxable year under the renegotiation laws of the United States of America, including renegotiation of the profits with a subcontractor, shall not enter into the computation.

(e) Federal income and excess profits taxes shall not be allowed as a deduction.

new text begin(f) The 80-percent limitation under section 172(a)(2) of the Internal Revenue Code does not apply to the computations for corporate taxpayers under this section.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 61.

Subd. 2.

Income not derived from conduct of a trade or business.

The income of a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section 3401(a) deleted text beginanddeleted text endnew text begin,new text end (f)new text begin, and (i)new text end of the Internal Revenue Code is assigned to this state if, and to the extent that, the work of the employee is performed within it; all other income from such sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete or entertainer, income from compensation for labor or personal services performed within this state shall be determined in the following manner:

(i) the amount of income to be assigned to Minnesota for an individual who is a nonresident salaried athletic team employee shall be determined by using a fraction in which the denominator contains the total number of days in which the individual is under a duty to perform for the employer, and the numerator is the total number of those days spent in Minnesota. For purposes of this paragraph, off-season training activities, unless conducted at the team's facilities as part of a team imposed program, are not included in the total number of duty days. Bonuses earned as a result of play during the regular season or for participation in championship, play-off, or all-star games must be allocated under the formula. Signing bonuses are not subject to allocation under the formula if they are not conditional on playing any games for the team, are payable separately from any other compensation, and are nonrefundable; and

(ii) the amount of income to be assigned to Minnesota for an individual who is a nonresident, and who is an athlete or entertainer not listed in item (i), for that person's athletic or entertainment performance in Minnesota shall be determined by assigning to this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement income" as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public Law 104-95, are not considered income derived from carrying on a trade or business or from wages or other compensation for work an employee performed in Minnesota, and are not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business of the recipient of the income or gains must be assigned to this state if the recipient of the income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in this state to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than 50 percent of the value of the partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was allocable to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income allocated to this state is in the ratio of the employee's service in Minnesota in the calendar year preceding leaving the employment of the employer over the total services performed by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75, subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered to be conducting a trade or business.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for wages paid after December 31, 2017.new text end

Sec. 62.

Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent of dividends received by a corporation during the taxable year from another corporation, in which the recipient owns 20 percent or more of the stock, by vote and value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of the income and gains therefrom; and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in an affiliated company transferred in an overall plan of reorganization and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and the dividend is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended through December 31, 1989, or is deducted under an election under section 243(b) of the Internal Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either: (A) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year from another corporation in which the recipient owns less than 20 percent of the stock, by vote or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate stock with respect to which dividends are paid does not constitute the stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business, or when the trade or business of the taxpayer does not consist principally of the holding of the stocks and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with respect to dividends that are included in a corporation's Minnesota taxable net income for the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend from a corporation which, for the taxable year of the corporation in which the distribution is made or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend received from a real estate investment trust as defined in section 856 of the Internal Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of regulated investment company dividends only to the extent determined under section 854(b) of the Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with respect to any dividend for which a deduction is not allowed under the provisions of section 246(c)new text beginor 246Anew text end of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota under the provisions of Public Law 86-272 are included as income on the return of an affiliated corporation permitted or required to file a combined report under section 290.17, subdivision 4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to whether the trade or business of the corporation consists principally of the holding of stocks and the collection of income and gains therefrom shall be made with reference to the trade or business of the affiliated corporation having a nexus with Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are paid by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on the combined report received a dividend, the deduction under this subdivision for each member of the unitary business required to file a return under this chapter is the product of: (1) 100 percent of the dividends received by members of the group; (2) the percentage allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income apportionable to this state for the taxable year under section 290.191 or 290.20.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 63.

Minnesota Statutes 2016, section 290.21, is amended by adding a subdivision to read:

new text beginSubd. 9.new text end

new text beginControlled foreign corporations.new text end

new text beginThe income of a domestic corporation that is included in net income under section 965 or other provisions of subchapter N, part III, subpart F, of the Internal Revenue Code is dividend income.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016, with regard to income section 965 of the Internal Revenue Code and confirms the treatment of income under subpart F of the Internal Revenue Code as dividend income for any open taxable year.new text end

Sec. 64.

Minnesota Statutes 2016, section 290.34, is amended by adding a subdivision to read:

new text beginSubd. 5.new text end

new text beginTo be consistent with the federal treatment of the interest expense limitation under section 163(j) of the Internal Revenue Code for an affiliated group that includes an insurance company taxable under chapter 297I and exempt from taxation under section 290.05, subdivision 1, clause (c), the rules under this subdivision apply. In that case, the interest expense limitation under section 163(j) must be computed for the corporation subject to tax under this chapter using the adjusted taxable income of the insurance companies that are part of the affiliated group and taxed under chapter 297I. For purposes of this subdivision, "affiliated group" means the corporations included in the federal consolidated return for the taxable year.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 65.

Minnesota Statutes 2016, section 290.34, is amended by adding a subdivision to read:

new text beginSubd. 6.new text end

new text beginSection 163(j) of the Internal Revenue Code shall be applied to affiliated corporations permitted or required to file a combined report under section 290.17, subdivision 4, consistent with its application to a consolidated group of corporations for federal income tax purposes.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 66.

Subdivision 1.

Definitions.

(1) Wages. For purposes of this section, the term "wages" means the same as that term is defined in section 3401(a) deleted text beginanddeleted text endnew text begin,new text end (f)new text begin, and (i)new text end of the Internal Revenue Code.

(2) Payroll period. For purposes of this section the term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by the employee's employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

(3) Employee. For purposes of this section the term "employee" means any resident individual performing services for an employer, either within or without, or both within and without the state of Minnesota, and every nonresident individual performing services within the state of Minnesota, the performance of which services constitute, establish, and determine the relationship between the parties as that of employer and employee. As used in the preceding sentence, the term "employee" includes an officer of a corporation, and an officer, employee, or elected official of the United States, a state, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

(4) Employer. For purposes of this section the term "employer" means any person, including individuals, fiduciaries, estates, trusts, partnerships, limited liability companies, and corporations transacting business in or deriving any income from sources within the state of Minnesota for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term "employer," except for purposes of paragraph (1), means the person having control of the payment of such wages. As used in the preceding sentence, the term "employer" includes any corporation, individual, estate, trust, or organization which is exempt from taxation under section 290.05 and further includes, but is not limited to, officers of corporations who have control, either individually or jointly with another or others, of the payment of the wages.

(5) Number of withholding exemptions claimed. For purposes of this section, the term "number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under subdivision 5, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for wages paid after July 1, 2018.new text end

Sec. 67.

Subd. 3.

Income.

(1) federal adjusted gross income as defined in the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code, to the extent the sum of amounts exceeds the retirement base amount for the claimant and spouse;

(xii) to the extent not included in federal adjusted gross income, distributions received by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

(xiv) deleted text beginthe amount of deduction allowed under section 199 of the Internal Revenue Codedeleted text endnew text beginalimony received to the extent not included in the recipient's incomenew text end;

(xv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;

(xvi) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; deleted text beginanddeleted text end

(xvii) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Codenew text begin;new text end

new text begin(xviii) the amount excluded from federal adjusted gross income for qualified moving expense reimbursements under section 132(a)(6) of the Internal Revenue Code, as amended through December 16, 2016; andnew text end

new text begin(xix) the amount deducted from federal adjusted gross income for moving expenses under section 217 of the Internal Revenue Code, as amended through December 16, 2016new text end.

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" shall mean federal adjusted gross income reflected in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

(2) amounts of any pension or annuity which was exclusively funded by the claimant or spouse and which funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

(3) to the extent included in federal adjusted gross income, amounts contributed by the claimant or spouse to a traditional or Roth style retirement account or plan, but not to exceed the retirement base amount reduced by the amount of contributions excluded from federal adjusted gross income, but not less than zero;

(4) surplus food or other relief in kind supplied by a governmental agency;

(5) relief granted under this chapter;

(6) child support payments received under a temporary or final decree of dissolution or legal separation; or

(7) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16.

(c) The sum of the following amounts may be subtracted from income:

(1) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(2) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(3) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(4) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(5) for the claimant's fifth dependent, the exemption amount; and

(6) if the claimant or claimant's spouse was disabled or attained the age of 65 on or before December 31 of the year for which the taxes were levied or rent paid, the exemption amount.

new text begin(1)new text end "exemption amount" means deleted text beginthe exemption amount under section 151(d) of the Internal Revenue Code for the taxable year for which the income is reported; "retirement base amount" means the deductible amount for the taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard to whether the claimant or spouse claimed a deduction; and "traditional or Roth style retirement account or plan" means retirement plans under sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.deleted text endnew text begin $4,150. For refunds payable after December 31, 2018, the commissioner shall annually adjust the $4,150 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, as amended through March 31, 2018. The exemption amount as adjusted for inflation must be rounded to the nearest $50. If the amount is not a multiple of $50, the commissioner shall round down to the next lowest multiple of $50. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act, including section 14.386; andnew text end

new text begin(2) "retirement base amount" means the deductible amount for the taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal Revenue Code, adjusted for inflation as provided in section 219(b)(5)(C) of the Internal Revenue Code, without regard to whether the claimant or spouse claimed a deduction, and "traditional or Roth-style retirement account or plan" means retirement plans under sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refunds based on property taxes payable after December 31, 2018, and rent paid after December 31, 2017.new text end

Sec. 68.

Subd. 12.

Gross rent.

(a) "Gross rent" means rental paid for the right of occupancy, at arm's length, of a homestead, exclusive of charges for any medical services furnished by the landlord as a part of the rental agreement, whether expressly set out in the rental agreement or not.

(b) The gross rent of a resident of a nursing home or intermediate care facility is deleted text begin$350deleted text endnew text begin$490new text end per month. The gross rent of a resident of an adult foster care home is deleted text begin$550deleted text endnew text begin $760new text end per month. Beginning for rent paid in deleted text begin2002deleted text endnew text begin 2019new text end, the commissioner shall annually adjust for inflation the gross rent amounts stated in this paragraph. The adjustment must be made in accordance with section 1(f) of the Internal Revenue Code, except that for purposes of this paragraph the percentage increase shall be determined from the year ending on June 30, deleted text begin2001deleted text endnew text begin 2017new text end, to the year ending on June 30 of the year in which the rent is paid. The commissioner shall round the gross rents to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to the next $10 amount. The determination of the commissioner under this paragraph is not a rule under the Administrative Procedure Act.

(c) If the landlord and tenant have not dealt with each other at arm's length and the commissioner determines that the gross rent charged was excessive, the commissioner may adjust the gross rent to a reasonable amount for purposes of this chapter.

(d) Any amount paid by a claimant residing in property assessed pursuant to section 273.124, subdivision 3, 4, 5, or 6 for occupancy in that property shall be excluded from gross rent for purposes of this chapter. However, property taxes imputed to the homestead of the claimant or the dwelling unit occupied by the claimant that qualifies for homestead treatment pursuant to section 273.124, subdivision 3, 4, 5, or 6 shall be included within the term "property taxes payable" as defined in subdivision 13, notwithstanding the fact that ownership is not in the name of the claimant.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refunds based on rent paid after December 31, 2017, and property taxes payable after December 31, 2018.new text end

Sec. 70.

Subd. 2.

Homeowners; homestead credit refund.

A claimant whose property taxes payable are in excess of the percentage of the household income stated below shall pay an amount equal to the percent of income shown for the appropriate household income level along with the percent to be paid by the claimant of the remaining amount of property taxes payable. The state refund equals the amount of property taxes payable that remain, up to the state refund amount shown below.

The payment made to a claimant shall be the amount of the state refund calculated under this subdivision. No payment is allowed if the claimant's household income is deleted text begin$105,500deleted text endnew text begin$112,750new text end or more.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refunds based on property taxes payable after December 31, 2017.new text end

Sec. 71.

Subd. 2a.

Renters.

A claimant whose rent constituting property taxes exceeds the percentage of the household income stated below must pay an amount equal to the percent of income shown for the appropriate household income level along with the percent to be paid by the claimant of the remaining amount of rent constituting property taxes. The state refund equals the amount of rent constituting property taxes that remain, up to the maximum state refund amount shown below.

The payment made to a claimant is the amount of the state refund calculated under this subdivision. No payment is allowed if the claimant's household income is deleted text begin$57,170deleted text endnew text begin $61,100new text endor more.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refunds based on rent paid after December 31, 2016.new text end

Sec. 72.

Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in calendar year 2002, the commissioner shall annually adjust the dollar amounts of the income thresholds and the maximum refunds under subdivisions 2 and 2a for inflation. The commissioner shall make the inflation adjustments in accordance with section 1(f) of the Internal Revenue Code, except that for purposes of this subdivision the percentage increase shall be determined as provided in this subdivision.

(b) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2 for inflation, the percentage increase shall be determined from the year ending on June 30, deleted text begin2013deleted text endnew text begin 2018new text end, to the year ending on June 30 of the year preceding that in which the refund is payable.

(c) In adjusting the dollar amounts of the income thresholds and the maximum refunds under subdivision 2a for inflation, the percentage increase shall be determined from the year ending on June 30, deleted text begin2013deleted text endnew text begin 2018new text end, to the year ending on June 30 of the year preceding that in which the refund is payable.

(d) The commissioner shall use the appropriate percentage increase to annually adjust the income thresholds and maximum refunds under subdivisions 2 and 2a for inflation without regard to whether or not the income tax brackets are adjusted for inflation in that year. The commissioner shall round the thresholds and the maximum amounts, as adjusted to the nearest $10 amount. If the amount ends in $5, the commissioner shall round it up to the next $10 amount.

(e) The commissioner shall annually announce the adjusted refund schedule at the same time provided under section 290.06. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refunds based on property taxes paid after December 31, 2018, and rent paid after December 31, 2017.new text end

Sec. 73.

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following terms used in this chapter shall have the following meanings:

(1) "Commissioner" means the commissioner of revenue or any person to whom the commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued and otherwise determined for federal estate tax purposes under the Internal Revenue Code, increased by the value of any property in which the decedent had a qualifying income interest for life and for which an election was made under section 291.03, subdivision 1d, for Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(4) "Minnesota gross estate" means the federal gross estate of a decedent after (a) excluding therefrom any property included in the estate which has its situs outside Minnesota, and (b) including any property omitted from the federal gross estate which is includable in the estate, has its situs in Minnesota, and was not disclosed to federal taxing authorities.

(5) "Nonresident decedent" means an individual whose domicile at the time of death was not in Minnesota.

(6) "Personal representative" means the executor, administrator or other person appointed by the court to administer and dispose of the property of the decedent. If there is no executor, administrator or other person appointed, qualified, and acting within this state, then any person in actual or constructive possession of any property having a situs in this state which is included in the federal gross estate of the decedent shall be deemed to be a personal representative to the extent of the property and the Minnesota estate tax due with respect to the property.

(7) "Resident decedent" means an individual whose domicile at the time of death was in Minnesota. The provisions of section 290.01, subdivision 7, paragraphs (c) and (d), apply to determinations of domicile under this chapter.

(8) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept or located at the time of the decedent's death or for a gift of tangible personal property within three years of death, the state or country in which it was normally kept or located when the gift was executed;

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue Code, owned by a nonresident decedent and that is normally kept or located in this state because it is on loan to an organization, qualifying as exempt from taxation under section 501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

(iv) intangible personal property, the state or country in which the decedent was domiciled at death or for a gift of intangible personal property within three years of death, the state or country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity with assets that include real or tangible personal property, situs of the real or tangible personal property, including qualified works of art, is determined as if the pass-through entity does not exist and the real or tangible personal property is personally owned by the decedent. If the pass-through entity is owned by a person or persons in addition to the decedent, ownership of the property is attributed to the decedent in proportion to the decedent's capital ownership share of the pass-through entity.

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of whether it is taxed as an association or is disregarded for federal income tax purposes under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross estate; but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated by the Securities and Exchange Commission as a national securities exchange under section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for estates of decedents dying after December 31, 2017.new text end

Sec. 74.

Subd. 25.

Sale of property used in a trade or business.

(a) The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling that kind of property and if one of the following conditions is satisfied:

(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end;

(2) the sale is between members of a controlled group as defined in section 1563(a) of the Internal Revenue Code;

(3) the sale is a sale of farm machinery;

(4) the sale is a farm auction sale;

(5) the sale is a sale of substantially all of the assets of a trade or business; or

(6) the total amount of gross receipts from the sale of trade or business property made during the calendar month of the sale and the preceding 11 calendar months does not exceed $1,000.

The use, storage, distribution, or consumption of tangible personal property acquired as a result of a sale exempt under this subdivision is also exempt.

(b) For purposes of this subdivision, the following terms have the meanings given.

(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially all of the property sold consists of property used in the trade or business of farming and property not used primarily in a trade or business.

(2) "Trade or business" includes the assets of a separate division, branch, or identifiable segment of a trade or business if, before the sale, the income and expenses attributable to the separate division, branch, or identifiable segment could be separately ascertained from the books of account or record (the lease or rental of an identifiable segment does not qualify for the exemption).

(3) A "sale of substantially all of the assets of a trade or business" must occur as a single transaction or a series of related transactions within the 12-month period beginning on the date of the first sale of assets intended to qualify for the exemption provided in paragraph (a), clause (5).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for sales and purchases made after December 31, 2017.new text end

Sec. 75.

Minnesota Statutes 2016, section 297B.03, is amended to read:

297B.03 EXEMPTIONS.

There is specifically exempted from the provisions of this chapter and from computation of the amount of tax imposed by it the following:

(1) purchase or use, including use under a lease purchase agreement or installment sales contract made pursuant to section 465.71, of any motor vehicle by the United States and its agencies and instrumentalities and by any person described in and subject to the conditions provided in section 297A.67, subdivision 11;

(2) purchase or use of any motor vehicle by any person who was a resident of another state or country at the time of the purchase and who subsequently becomes a resident of Minnesota, provided the purchase occurred more than 60 days prior to the date such person began residing in the state of Minnesota and the motor vehicle was registered in the person's name in the other state or country;

(3) purchase or use of any motor vehicle by any person making a valid election to be taxed under the provisions of section 297A.90;

(4) purchase or use of any motor vehicle previously registered in the state of Minnesota when such transfer constitutes a transfer within the meaning of section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal Revenue Codenew text begin, as amended through December 16, 2016new text end;

(5) purchase or use of any vehicle owned by a resident of another state and leased to a Minnesota-based private or for-hire carrier for regular use in the transportation of persons or property in interstate commerce provided the vehicle is titled in the state of the owner or secured party, and that state does not impose a sales tax or sales tax on motor vehicles used in interstate commerce;

(6) purchase or use of a motor vehicle by a private nonprofit or public educational institution for use as an instructional aid in automotive training programs operated by the institution. "Automotive training programs" includes motor vehicle body and mechanical repair courses but does not include driver education programs;

(7) purchase of a motor vehicle by an ambulance service licensed under section 144E.10when that vehicle is equipped and specifically intended for emergency response or for providing ambulance service;

(8) purchase of a motor vehicle by or for a public library, as defined in section 134.001, subdivision 2, as a bookmobile or library delivery vehicle;

(9) purchase of a ready-mixed concrete truck;

(10) purchase or use of a motor vehicle by a town for use exclusively for road maintenance, including snowplows and dump trucks, but not including automobiles, vans, or pickup trucks;

(11) purchase or use of a motor vehicle by a corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes, except a public school, university, or library, but only if the vehicle is:

(i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a passenger automobile, as defined in section 168.002, if the automobile is designed and used for carrying more than nine persons including the driver; and

(ii) intended to be used primarily to transport tangible personal property or individuals, other than employees, to whom the organization provides service in performing its charitable, religious, or educational purpose;

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide transit service is exempt if the transit provider is either (i) receiving financial assistance or reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29, 473.388, or 473.405;

(13) purchase or use of a motor vehicle by a qualified business, as defined in section 469.310, located in a job opportunity building zone, if the motor vehicle is principally garaged in the job opportunity building zone and is primarily used as part of or in direct support of the person's operations carried on in the job opportunity building zone. The exemption under this clause applies to sales, if the purchase was made and delivery received during the duration of the job opportunity building zone. The exemption under this clause also applies to any local sales and use tax;

(14) purchase of a leased vehicle by the lessee who was a participant in a lease-to-own program from a charitable organization that is:

(15) purchase of a motor vehicle used exclusively as a mobile medical unit for the provision of medical or dental services by a federally qualified health center, as defined under title 19 of the Social Security Act, as amended by Section 4161 of the Omnibus Budget Reconciliation Act of 1990.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for sales and purchases made after December 31, 2017.new text end

Sec. 76.

Subdivision 1.

Subtraction.

(a) As provided in section 290.0132, subdivision 25, an account holder is allowed a subtraction from deleted text beginthedeleted text end federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income equal to interest or dividends earned on the first-time home buyer savings account during the taxable year.

(b) The subtraction under paragraph (a) is allowed each year for the taxable years including and following the taxable year in which the account was established. No person other than the account holder is allowed a subtraction under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 77.

Subd. 2.

Addition.

(a) As provided in section 290.0131, subdivision 14, an account holder must add to federal deleted text begintaxabledeleted text endnew text begin adjusted grossnew text end income the following amounts:

(1) the amount in excess of the total contributions for all taxable years that is withdrawn and used for other than eligible costs, or for a transfer permitted under section 462D.04, subdivision 2; and

(2) the amount remaining in the first-time home buyer savings account at the close of the tenth taxable year that exceeds the total contributions to the account for all taxable years.

(b) For an account that received a transfer under section 462D.04, subdivision 2, the ten-year period under paragraph (a), clause (2), ends at the close of the earliest taxable year that applies to either account under that clause.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 78.

Subdivision 1.

Application.

An individual, estate, or trust operating a trade or business in a job opportunity building zone, and an individual, estate, or trust making a qualifying investment in a qualified business operating in a job opportunity building zone qualifies for the exemptions from taxes imposed under chapter 290, as provided in this section. The exemptions provided under this section apply only to the extent that the income otherwise would be taxable under chapter 290. Subtractions under this section from new text beginfederal adjusted gross income, new text endfederal taxable income, alternative minimum taxable income, or any other base subject to tax are limited to the amount that otherwise would be included in the tax base absent the exemption under this section. This section applies only to taxable years beginning during the duration of the job opportunity building zone.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 79.

Minnesota Statutes 2016, section 469.317, is amended to read:

469.317 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under section 290.02deleted text begin, the alternative minimum tax under section 290.0921,deleted text end and the minimum fee under section 290.0922deleted text begin,deleted text end on the portion of its income attributable to operations within the zone. deleted text beginThis exemption is determined as follows:deleted text end

deleted text begin(1)deleted text endnew text begin(b) new text endFor purposes of the tax imposed under section 290.02, new text beginthe exemption is determined new text endby multiplying its taxable net income by its zone percentage and by its relocation payroll percentage and subtracting the result in determining taxable incomedeleted text begin;deleted text endnew text begin.new text end

deleted text begin(2) for purposes of the alternative minimum tax under section 290.0921, by multiplying its alternative minimum taxable income by its zone percentage and by its relocation payroll percentage and reducing alternative minimum taxable income by this amount; anddeleted text end

deleted text begin(3)deleted text endnew text begin(c) new text endFor purposes of the minimum fee under section 290.0922, new text beginthe exemption is determined new text endby excluding property and payroll in the zone from the computations of the fee or by exempting the entity under section 290.0922, subdivision 2, clause (7).

deleted text begin(b)deleted text endnew text begin (d)new text end No subtraction is allowed under this section in excess of 20 percent of the sum of the corporation's job opportunity building zone payroll and the adjusted basis of the property at the time that the property is first used in the job opportunity building zone by the corporation.

deleted text begin(c)deleted text endnew text begin (e)new text end This section applies only to taxable years beginning during the duration of the job opportunity building zone.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 80. new text beginESTIMATED TAXES; EXCEPTIONS.new text end

new text beginNo addition to tax, penalties, or interest may be made under Minnesota Statutes, section 289A.25 or 289A.26, for any period before November 15, 2018, with respect to an underpayment of estimated tax, to the extent that the underpayment was created or increased by the inclusion of deferred foreign income in federal taxable income under section 965 of the Internal Revenue Code under this article.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2016.new text end

ARTICLE 3

INDIVIDUAL INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES

Section 1.

Subd. 5.

Credit allowed.

(a)(1) A qualified investor or qualified fund is eligible for a credit equal to 25 percent of the qualified investment in a qualified small business. Investments made by a pass-through entity qualify for a credit only if the entity is a qualified fund. The commissioner must not allocate more than deleted text begin$15,000,000deleted text endnew text begin $5,000,000new text end in credits to qualified investors or qualified funds for taxable years beginning after December 31, deleted text begin2013deleted text endnew text begin2017new text end, and before January 1, deleted text begin2017, and must not allocate more than $10,000,000 in credits to qualified investors or qualified funds for taxable years beginning after December 31, 2016, and before January 1, 2018deleted text endnew text begin 2019new text end; and

(2) deleted text beginfor taxable years beginning after December 31, 2014, and before January 1, 2018, deleted text end50 percent must be allocated to credits for qualifying investments in qualified greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying investments in greater Minnesota businesses and minority- or women-owned qualified small businesses in Minnesota that is not allocated by September 30 of the taxable year is available for allocation to other credit applications beginning on October 1. Any portion of a taxable year's credits that is not allocated by the commissioner does not cancel and may be carried forward to subsequent taxable years until all credits have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits for a taxable year to a qualified investor for the investor's cumulative qualified investments as an individual qualified investor and as an investor in a qualified fund; for married couples filing joint returns the maximum is $250,000, and for all other filers the maximum is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an individual qualified investor or as an investor in a qualified fund if, at the time the investment is proposed:

(1) the investor is an officer or principal of the qualified small business; or

(2) the investor, either individually or in combination with one or more members of the investor's family, owns, controls, or holds the power to vote 20 percent or more of the outstanding securities of the qualified small business.

A member of the family of an individual disqualified by this paragraph is not eligible for a credit under this section. For a married couple filing a joint return, the limitations in this paragraph apply collectively to the investor and spouse. For purposes of determining the ownership interest of an investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal Revenue Code apply.

(d) Applications for tax credits deleted text beginfor 2010deleted text end must be made available on the department's Web site by deleted text beginSeptember 1, 2010, and the department must begin accepting applications by September 1, 2010. Applications for subsequent years must be made available bydeleted text end November 1 of the preceding year.

(e) Qualified investors and qualified funds must apply to the commissioner for tax credits. Tax credits must be allocated to qualified investors or qualified funds in the order that the tax credit request applications are filed with the department. The commissioner must approve or reject tax credit request applications within 15 days of receiving the application. The investment specified in the application must be made within 60 days of the allocation of the credits. If the investment is not made within 60 days, the credit allocation is canceled and available for reallocation. A qualified investor or qualified fund that fails to invest as specified in the application, within 60 days of allocation of the credits, must notify the commissioner of the failure to invest within five business days of the expiration of the 60-day investment period.

(f) All tax credit request applications filed with the department on the same day must be treated as having been filed contemporaneously. If two or more qualified investors or qualified funds file tax credit request applications on the same day, and the aggregate amount of credit allocation claims exceeds the aggregate limit of credits under this section or the lesser amount of credits that remain unallocated on that day, then the credits must be allocated among the qualified investors or qualified funds who filed on that day on a pro rata basis with respect to the amounts claimed. The pro rata allocation for any one qualified investor or qualified fund is the product obtained by multiplying a fraction, the numerator of which is the amount of the credit allocation claim filed on behalf of a qualified investor and the denominator of which is the total of all credit allocation claims filed on behalf of all applicants on that day, by the amount of credits that remain unallocated on that day for the taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their behalf, must notify the commissioner when an investment for which credits were allocated has been made, and the taxable year in which the investment was made. A qualified fund must also provide the commissioner with a statement indicating the amount invested by each investor in the qualified fund based on each investor's share of the assets of the qualified fund at the time of the qualified investment. After receiving notification that the investment was made, the commissioner must issue credit certificates for the taxable year in which the investment was made to the qualified investor or, for an investment made by a qualified fund, to each qualified investor who is an investor in the fund. The certificate must state that the credit is subject to revocation if the qualified investor or qualified fund does not hold the investment in the qualified small business for at least three years, consisting of the calendar year in which the investment was made and the two following years. The three-year holding period does not apply if:

(1) the investment by the qualified investor or qualified fund becomes worthless before the end of the three-year period;

(2) 80 percent or more of the assets of the qualified small business is sold before the end of the three-year period;

(3) the qualified small business is sold before the end of the three-year period;

(4) the qualified small business's common stock begins trading on a public exchange before the end of the three-year period; or

(5) the qualified investor dies before the end of the three-year period.

(h) The commissioner must notify the commissioner of revenue of credit certificates issued under this section.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

new text beginEFFECTIVE DATE.new text end

Sec. 3.

Subd. 4a.

Financial institution.

(a) "Financial institution" means:

(1) any corporation or other business entity registered (i) under state law as a bank holding company; (ii) under the federal Bank Holding Company Act of 1956, as amended; or (iii) as a savings and loan holding company under the federal National Housing Act, as amended;

(2) a national bank organized and existing as a national bank association pursuant to the provisions of United States Code, title 12, chapter 2;

(3) a savings association or federal savings bank as defined in United States Code, title 12, section 1813(b)(1);

(4) any bank or thrift institution incorporated or organized under the laws of any state;

(5) any corporation organized under United States Code, title 12, sections 611 to 631;

(6) any agency or branch of a foreign depository as defined under United States Code, title 12, section 3101;

(7) any corporation or other business entity that is more than 50 percent owned, directly or indirectly, by any person or business entity described in clauses (1) to (6), other than an insurance company taxable under chapter 297I;

(8) a corporation or other business entity that derives more than 50 percent of its total gross income for financial accounting purposes from finance leases. For the purposes of this clause, "gross income" means the average from the current tax year and immediately preceding two years and excludes gross income from incidental or occasional transactions. For purposes of this clause, "finance lease" means any lease transaction that is the functional equivalent of an extension of credit and that transfers substantially all the benefits and risks incident to the ownership of property, including any direct financing lease or leverage lease that meets the criteria of Financial Accounting Standards Board Statement No. 13, accounting for leases, or any other lease that is accounted for as financing by a lessor under generally accepted accounting principles; or

(9) any other person or business entity, other than an insurance company deleted text begintaxable under chapter 297Ideleted text end, that derives more than 50 percent of its gross income from activities that an entity described in clauses (2) to (6) or (8) is authorized to transact. For the purposes of this clause, gross income does not include income from nonrecurring, extraordinary items.

(b) The commissioner is authorized to exclude any person from the application of paragraph (a), clause (9), if the person proves by clear and convincing evidence that the person's income-producing activity is not in substantial competition with any person described in paragraph (a), clauses (2) to (6) or (8).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 4.

Minnesota Statutes 2016, section 290.01, is amended by adding a subdivision to read:

new text beginSubd. 5c.new text end

new text beginDisqualified captive insurance company.new text end

new text begin(a) "Captive insurance company" means a company that:new text end

new text begin(1) is licensed as a captive insurance company under the laws of any state or foreign country; ornew text end

new text begin(2) derives less than 50 percent of its total premiums for the taxable year from sources outside of the unitary business, as that term is used in section 290.17.new text end

new text begin(b) A captive insurance company is a "disqualified captive insurance company" if the company:new text end

new text begin(1) pays less than 0.5 percent of its total premiums for the taxable year in tax under chapter 297I or a comparable tax of another state; ornew text end

new text begin(2) receives less than 50 percent of its gross receipts for the taxable year from premiums.new text end

new text begin(c) For purposes of this subdivision, "premiums" means amounts paid for arrangements that constitute insurance for federal income tax purposes, but excludes return premiums, premiums for reinsurance assumed from other insurance companies, and any other premiums that are or would be exempt from taxation under section 297I.05 as a result of their type or character, if the insurance was for business in Minnesota.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 5.

Minnesota Statutes 2016, section 290.0132, is amended by adding a subdivision to read:

new text beginSubd. 31.new text end

new text beginThe amount of expenses of a medical cannabis manufacturer, as defined under section 152.22, subdivision 7, related to the business of medical cannabis under sections 152.21 to 152.37, and not allowed for federal income tax purposes under section 280E of the Internal Revenue Code is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 6.

Minnesota Statutes 2016, section 290.0134, is amended by adding a subdivision to read:

new text beginSubd. 18.new text end

new text beginThe amount of expenses of a medical cannabis manufacturer, as defined under section 152.22, subdivision 7, related to the business of medical cannabis under sections 152.21 to 152.37, and not allowed for federal income tax purposes under section 280E of the Internal Revenue Code is a subtraction.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxable years beginning after December 31, 2017.new text end

Sec. 7.

Subdivision 1.

Exempt entities.

The following corporations, individuals, estates, trusts, and organizations shall be exempted from taxation under this chapter, provided that every such person or corporation claiming exemption under this chapter, in whole or in part, must establish to the satisfaction of the commissioner the taxable status of any income or activity:

(a) corporations, individuals, estates, and trusts engaged in the business of mining or producing iron ore and mining, producing, or refining other ores, metals, and minerals, the mining, production, or refining of which is subject to the occupation tax imposed by section 298.01; but if any such corporation, individual, estate, or trust engages in any other business or activity or has income from any property not used in such business it shall be subject to this tax computed on the net income from such property or such other business or activity. Royalty shall not be considered as income from the business of mining or producing iron ore within the meaning of this section;

(b) the United States of America, the state of Minnesota or any political subdivision of either agencies or instrumentalities, whether engaged in the discharge of governmental or proprietary functions; and

(c) any insurance company, deleted text beginas defined in section 290.17, subdivision 4, paragraph (j), but including any insurance company licensed and domiciled in another state that grants, on a reciprocal basis, exemption from retaliatory taxesdeleted text endnew text begin other than a disqualified captive insurance companynew text end.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 8.

Subdivision 1.

Credit allowed.

(a) An new text begineligible new text endindividual is allowed a credit against the tax imposed by this chapter equal to $2,000 for each deleted text beginbirth for which a certificate of birth resulting in stillbirth has been issued under section 144.2151deleted text endnew text begin stillbirthnew text end. The credit under this section is allowed only in the taxable year in which the stillbirth occurred deleted text beginand if the child would have been a dependent of the taxpayer as defined in section 152 of the Internal Revenue Codedeleted text end.

(b) For a deleted text beginnonresident ordeleted text end part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2015.new text end

Sec. 9.

Minnesota Statutes 2016, section 290.0685, is amended by adding a subdivision to read:

new text beginSubd. 1a.new text end

new text beginDefinitions.new text end

new text begin(a) For purposes of this section, the following terms have the meanings given, unless the context clearly indicates otherwise.new text end

new text begin(b) "Certificate of birth resulting in stillbirth" means the printed certificate of birth resulting in stillbirth issued under section 144.2151 or for a stillbirth occurring in another state or country a similar certificate issued under that state's or country's law that documents that the still birth occurred.new text end

new text begin(c) "Eligible individual" means an individual who is:new text end

new text begin(1)(i) a resident; ornew text end

new text begin(ii) the nonresident spouse of a resident who is a member of armed forces of the United States or the United Nations; andnew text end

new text begin(2)(i) the individual who gave birth resulting in stillbirth and is listed as a parent on the certificate of birth resulting in stillbirth; ornew text end

new text begin(ii) the individual who gave birth resulting in stillbirth for a birth outside of this state for which no certificate of birth resulting in stillbirth was issued.new text end

new text begin(d) "Stillbirth" means a birth for which a fetal death report would be required under section 144.222, subdivision 1, if the birth occurred in this state.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2015.new text end

Sec. 10.

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly within this state or partly within and partly without this state is part of a unitary business, the entire income of the unitary business is subject to apportionment pursuant to section 290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is considered to be derived from any particular source and none may be allocated to a particular place except as provided by the applicable apportionment formula. The provisions of this subdivision do not apply to business income subject to subdivision 5, income of an insurance company, or income of an investment company determined under section 290.36.

(b) The term "unitary business" means business activities or operations which result in a flow of value between them. The term may be applied within a single legal entity or between multiple entities and without regard to whether each entity is a sole proprietorship, a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced by centralized management or executive force, centralized purchasing, advertising, accounting, or other controlled interaction, but the absence of these centralized activities will not necessarily evidence a nonunitary business. Unity is also presumed when business activities or operations are of mutual benefit, dependent upon or contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business entity that carries on business activity outside the state different in kind from that conducted within this state, and the other business is conducted entirely outside the state, it is presumed that the two business operations are unitary in nature, interrelated, connected, and interdependent unless it can be shown to the contrary.

(e) Unity of ownership does not exist when two or more corporations are involved unless more than 50 percent of the voting stock of each corporation is directly or indirectly owned by a common owner or by common owners, either corporate or noncorporate, or by one or more of the member corporations of the group. For this purpose, the term "voting stock" shall include membership interests of mutual insurance holding companies formed under section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign corporations and other foreign entitiesnew text begin, but excluding a disqualified captive insurance company,new text end which are part of a unitary business shall not be included in the net income or the apportionment factors of the unitary business; except that the income and apportionment factors of a foreign entity, other than an entity treated as a C corporation for federal income tax purposes, that are included in the federal taxable income, as defined in section 63 of the Internal Revenue Code as amended through the date named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or individual must be included in determining net income and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20. A foreign corporation or other foreign entity which is not included on a combined report and which is required to file a return under this chapter shall file on a separate return basis.

(g) For purposes of determining the net income of a unitary business and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there must be included only the income and apportionment factors of domestic corporations or other domestic entities that are determined to be part of the unitary business pursuant to this subdivision, notwithstanding that foreign corporations or other foreign entities might be included in the unitary business; except that the income and apportionment factors of a foreign entity, other than an entity treated as a C corporation for federal income tax purposes, that is included in the federal taxable income, as defined in section 63 of the Internal Revenue Code as amended through the date named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or individual must be included in determining net income and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20.

(h) Each corporation or other entity, except a sole proprietorship, that is part of a unitary business must file combined reports as the commissioner determines. On the reports, all intercompany transactions between entities included pursuant to paragraph (g) must be eliminated and the entire net income of the unitary business determined in accordance with this subdivision is apportioned among the entities by using each entity's Minnesota factors for apportionment purposes in the numerators of the apportionment formula and the total factors for apportionment purposes of all entities included pursuant to paragraph (g) in the denominators of the apportionment formula. Except as otherwise provided by paragraph (f), all sales of the unitary business made within this state pursuant to section 290.191 or 290.20 must be included on the combined report of a corporation or other entity that is a member of the unitary business and is subject to the jurisdiction of this state to impose tax under this chapter.

(i) If a corporation has been divested from a unitary business and is included in a combined report for a fractional part of the common accounting period of the combined report:

(1) its income includable in the combined report is its income incurred for that part of the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must be prorated or accounted for separately.

(j) For purposes of this subdivision, "insurance company" means an insurance company, as defined in section 290.01, subdivision 5b, that isdeleted text begin:deleted text end

deleted text begin(1) licensed to engage in the business of insurance in Minnesota pursuant to chapter 60A; ordeleted text end

deleted text begin(2) domiciled and licensed to engage in the business of insurance in another state or country that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees and that does not grant, on a reciprocal basis, exemption from such retaliatory taxes to insurance companies or their agents domiciled in Minnesota.deleted text end

deleted text begin(k) For purposes of this subdivision, "retaliatory taxes" means taxes imposed on insurance companies organized in another state or country that result from the fact that an insurance company organized in the taxing jurisdiction and doing business in the other jurisdiction is subject to taxes, fines, deposits, penalties, licenses, or fees in an amount exceeding that imposed by the taxing jurisdiction upon an insurance company organized in the other state or country and doing business to the same extent in the taxing jurisdictiondeleted text endnew text begin not a disqualified captive insurance companynew text end.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for taxable years beginning after December 31, 2016.new text end

Sec. 11.

Subd. 8.

Definitions.

(a) For purposes of this section, the following terms have the meanings given in this subdivision.

(b) "Family member" means a family member as defined in section 2032A(e)(2) of the Internal Revenue Code, or a trust whose present beneficiaries are all family members as defined in section 2032A(e)(2) of the Internal Revenue Code.

(c) "Qualified heir" means a family member who acquired qualified property upon the death of the decedent and satisfies the requirement under subdivision 9, clause deleted text begin(7)deleted text endnew text begin (8)new text end, or subdivision 10, clause (5), for the property.

Sec. 12.

Subd. 9.

Qualified small business property.

Property satisfying all of the following requirements is qualified small business property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of the assets of a trade or business or shares of stock or other ownership interests in a corporation or other entity engaged in a trade or business. Shares of stock in a corporation or an ownership interest in another type of entity do not qualify under this subdivision if the shares or ownership interests are traded on a public stock exchange at any time during the three-year period ending on the decedent's date of death. For purposes of this subdivision, an ownership interest includes the interest the decedent is deemed to own under deleted text beginsectionsdeleted text endnew text begin sectionnew text end 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal Revenue Code.

(3) During the taxable year that ended before the decedent's death, the trade or business must not have been a passive activity within the meaning of section 469(c) of the Internal Revenue Code, and the decedent or the decedent's spouse must have materially participated in the trade or business within the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other provision provided by United States Treasury Department regulation that substitutes material participation in prior taxable years for material participation in the taxable year that ended before the decedent's death.

(4) The gross annual sales of the trade or business were $10,000,000 or less for the last taxable year that ended before the date of the death of the decedent.

(5) The property does not include:

(i) cash;

(ii) cash equivalents;

(iii) publicly traded securities; or

(iv) any assets not used in the operation of the trade or business.

(6) For property consisting of shares of stock or other ownership interests in an entity, the value of items described in clause (5) must be excluded in the valuation of the decedent's interest in the entity.

(7) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an undivided or joint interest in the property,new text end including property the decedentnew text begin or the decedent's spousenew text end is deemed to own under deleted text beginsectionsdeleted text endnew text begin sectionnew text end 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of death of the decedent. In the case of a sole proprietor, if the property replaced similar property within the three-year period, the replacement property will be treated as having been owned for the three-year period ending on the date of death of the decedent.new text begin For the purposes of the three-year holding period under this clause, any ownership by the decedent's spouse, whether the spouse predeceases or survives the decedent, is attributed to the decedent.new text end

(8) For three years following the date of death of the decedent, the trade or business is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code, and a family member materially participates in the operation of the trade or business within the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other provision provided by United States Treasury Department regulation that substitutes material participation in prior taxable years for material participation in the three years following the date of death of the decedent.

(9) The estate and the qualified heir elect to treat the property as qualified small business property and agree, in the form prescribed by the commissioner, to pay the recapture tax under subdivision 11, if applicable.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for estates of decedents dying after December 31, 2017.new text end

Sec. 13.

Subd. 10.

Qualified farm property.

Property satisfying all of the following requirements is qualified farm property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of agricultural land and is owned by a person or entity that is either not subject to or is in compliance with section 500.24.

(3) For property taxes payable in the taxable year of the decedent's death, the property is classified as class 2a property under section 273.13, subdivision 23, and is classified as agricultural homestead, agricultural relative homestead, or special agricultural homestead under section 273.124.

(4) The decedentnew text begin or the decedent's spousenew text end continuously owned the property,new text begin or an undivided or joint interest in the property,new text end including property the decedentnew text begin or the decedent's spousenew text end is deemed to own under deleted text beginsectionsdeleted text endnew text begin sectionnew text end 2036, 2037, deleted text beginanddeleted text end 2038new text begin, 2040, or 2044new text end of the Internal Revenue Code,new text begin or under subdivision 1d,new text end for the three-year period ending on the date of death of the decedent either by ownership of the agricultural land or pursuant to holding an interest in an entity that is not subject to or is in compliance with section 500.24.new text beginFor the purposes of the three-year holding period under this clause, any ownership by the decedent's spouse, whether the spouse predeceases or survives the decedent, is attributed to the decedent.new text end

(5) The property is classified for property tax purposes as class 2a property under section 273.13, subdivision 23, for three years following the date of death of the decedent.

(6) The estate and the qualified heir elect to treat the property as qualified farm property and agree, in a form prescribed by the commissioner, to pay the recapture tax under subdivision 11, if applicable.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for estates of decedents dying after December 31, 2017.new text end

Sec. 14.

Subd. 11.

Recapture tax.

(a) If, within three years after the decedent's death and before the death of the qualified heir, the qualified heir disposes of any interest in the qualified property, other than by a disposition to a family member, or a family member ceases to satisfy the requirement under subdivision 9, clause deleted text begin(7)deleted text endnew text begin (8)new text end; or 10, clause (5), an additional estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir replaces qualified small business property excluded under subdivision 9 with similar property, then the qualified heir will not be treated as having disposed of an interest in the qualified property.

(b) The amount of the additional tax equals the amount of the deleted text beginexclusiondeleted text endnew text begin subtractionnew text endclaimed by the estate under new text beginsection 291.016, subdivision 3, for qualified property as defined in new text endsubdivision 8, paragraph (d), multiplied by 16 percent.

(c) The additional tax under this subdivision is due on the day which is six months after the date of the disposition or cessation in paragraph (a).

(d) The tax under this subdivision does not apply to the acquisition of title or possession of the qualified property by a federal, state, or local government unit, or any other entity with the power of eminent domain for a public purpose, as defined in section 117.025, subdivision 11, within the three-year holding period.

(e) This subdivision shall not apply as a result of any of the following:

(1) a portion of qualified farm property consisting of less than one-fifth of the acreage of the property is reclassified as class 2b property under section 273.13, subdivision 23, and the qualified heir has not substantially altered the reclassified property during the three-year holding period; or

(2) a portion of qualified farm property classified as 2a property at the death of the decedent pursuant to section 273.13, subdivision 23, paragraph (a), consisting of a residence, garage, and immediately surrounding one acre of land is reclassified as 4bb property during the three-year holding period, and the qualified heir has not substantially altered the property.

new text begin(f) This paragraph applies only to estates of decedents dying after June 30, 2011, and before January 1, 2017, for which no tax liability was reported on the final estate tax return. For purposes of estates qualifying under this paragraph, the amount of the subtraction claimed by the estate for purposes of calculating the tax under paragraph (b) is deemed to be the minimum amount of the subtraction necessary to reduce the amount of estate tax to zero, without regard to the amount actually claimed on the final estate tax return. The provisions of this paragraph expire effective January 1, 2020.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThe provisions of this section adding paragraph (f) are effective retroactively for estates of decedents dying after June 30, 2011, and before January 1, 2017, and claims for refund of recapture tax may be made under a process established by the commissioner for estates entitled to refunds under the section. The authority to file claims for refunds under these provisions expires on January 1, 2020.new text end

Sec. 15. new text beginAPPLICATION OF ANGEL TAX CREDIT FOR TAXABLE YEAR 2018.new text end

new text beginApplications for (1) certification as a qualified small business, qualified investor, or qualified fund under Minnesota Statutes, section 116J.8737, subdivisions 2, 3, and 4, and (2) the credit under Minnesota Statutes, section 116J.8737, subdivision 5, for taxable year 2018 must be made available on the Department of Employment and Economic Development's Web site within 30 days of the day following final enactment of this act. The provisions of Minnesota Statutes, section 116J.8737, generally apply to the taxable year 2018 extension of the credit in sections 1 and 2.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

ARTICLE 4

SALES AND USE TAXES

Section 1.

Subd. 7.

(a) Sales, except for those listed in paragraph deleted text begin(d)deleted text endnew text begin (e)new text end, to a hospital are exempt, if the items purchased are used in providing hospital services. For purposes of this subdivision, "hospital" means a hospital organized and operated for charitable purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, and licensed under chapter 144 or by any other jurisdiction, and "hospital services" are services authorized or required to be performed by a "hospital" under chapter 144.

(b) Sales, except for those listed in paragraph deleted text begin(d)deleted text endnew text begin (e)new text end, to an outpatient surgical center are exempt, if the items purchased are used in providing outpatient surgical services. For purposes of this subdivision, "outpatient surgical center" means an outpatient surgical center organized and operated for charitable purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, and licensed under chapter 144 or by any other jurisdiction. For the purposes of this subdivision, "outpatient surgical services" means: (1) services authorized or required to be performed by an outpatient surgical center under chapter 144; and (2) urgent care. For purposes of this subdivision, "urgent care" means health services furnished to a person whose medical condition is sufficiently acute to require treatment unavailable through, or inappropriate to be provided by, a clinic or physician's office, but not so acute as to require treatment in a hospital emergency room.

(c) Sales, except for those listed in paragraph deleted text begin(d)deleted text endnew text begin (e)new text end, to a critical access dental provider are exempt, if the items purchased are used in providing critical access dental care services. For the purposes of this subdivision, "critical access dental provider" means a dentist or dental clinic that qualifies under section 256B.76, subdivision 4, paragraph (b), and, in the previous calendar year, had no more than 15 percent of its patients covered by private dental insurance.

new text begin(d) Sales, except for those listed in paragraph (e), to a qualifying medical facility are exempt, if the items are purchased or used in providing medical services. For purposes of this subdivision, "qualifying medical facility" means a medical facility as defined in section 469.1812, subdivision 2a, that has been granted an abatement of the state general tax under section 469.1817.new text end

deleted text begin(d)deleted text endnew text begin (e)new text end This exemption does not apply to the following products and services:

(1) purchases made by a clinic, physician's office, or any other medical facility not operating as a hospital, outpatient surgical center, new text beginqualifying medical facility, new text endor critical access dental provider, even though the clinic, office, or facility may be owned and operated by a hospital, outpatient surgical center, new text beginqualifying medical facility, new text endor critical access dental provider;

(3) building and construction materials used in constructing buildings or facilities that will not be used principally by the hospital, outpatient surgical center,new text begin qualifying medical facility,new text end or critical access dental provider;

(4) building, construction, or reconstruction materials purchased by a contractor or a subcontractor as a part of a lump-sum contract or similar type of contract with a guaranteed maximum price covering both labor and materials for use in the construction, alteration, or repair of a hospital, outpatient surgical center, new text beginqualifying medical facility, new text endor critical access dental provider; or

deleted text begin(e)deleted text endnew text begin (f)new text end A limited liability company also qualifies for exemption under this subdivision if (1) it consists of a sole member that would qualify for the exemption, and (2) the items purchased qualify for the exemption.

deleted text begin(f)deleted text endnew text begin (g)new text end An entity that contains both a hospital and a nonprofit unit may claim this exemption on purchases made for both the hospital and nonprofit unit provided that:

(1) the nonprofit unit would have qualified for exemption under subdivision 4; and

(2) the items purchased would have qualified for the exemption.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 2.

Subd. 20.

Ice arenas and rinks.

Sales to organizations that exist primarily for the purpose of new text beginowning or new text endoperating ice arenas or rinks that are new text begin(1) new text endpart of new text begineither new text endthe Duluth Heritage Sports Centernew text begin or the David M. Thaler Sports Center;new text end and new text begin(2) new text endare used for youth and high school programsnew text begin,new text end are exempt if the organization is a private, nonprofit corporation exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 3.

Minnesota Statutes 2016, section 297A.70, is amended by adding a subdivision to read:

new text beginSubd. 21.new text end

new text beginNonprofit conservation clubs.new text end

new text beginSales to nonprofit conservation clubs are exempt. For purposes of this subdivision, a "nonprofit conservation club" means an organization exempt under section 501(c)(3) of the Internal Revenue Code that provides instruction, training, and facilities for shooting handguns or rifles.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 4.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision to read:

new text beginSubd. 51.new text end

new text beginPublic safety facilities.new text end

new text beginMaterials and supplies used or consumed in and equipment incorporated into construction or remodeling of the following public safety facilities are exempt:new text end

new text begin(1) the construction of a new fire station, which includes firefighting and public safety training facilities, in the city of Inver Grove Heights;new text end

new text begin(2) the construction of a new fire station or the remodeling and expansion of an existing fire station in the city of Virginia;new text end

new text begin(3) the construction of a new fire station on the campus of the Minnetonka City Hall; andnew text end

new text begin(4) the remodeling and expansion of an existing police and fire station in Minnetonka to accommodate its use as a police station.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after the day following final enactment and before January 1, 2021.new text end

Sec. 5.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision to read:

new text beginSubd. 52.new text end

new text beginNonprofit snowmobile clubs.new text end

new text beginBuilding materials and supplies purchased by a nonprofit snowmobile club and used or consumed to construct, reconstruct, or maintain or improve state or grant-in-aid snowmobile trails are exempt. A nonprofit snowmobile club is eligible for the exemption under this subdivision if it received, in the current year or in the previous three-year period, a state grant-in-aid grant administered by the Department of Natural Resources by applying for the grant with a local unit of government sponsor.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 6.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision to read:

new text beginSubd. 53.new text end

new text beginMedical facility in underserved area.new text end

new text beginMaterials and supplies used or consumed in, and equipment incorporated into, the construction or improvement of real property that has been granted an abatement of the state general tax under section 469.1817 are exempt.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 7.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision to read:

new text beginSubd. 54.new text end

new text beginProperties destroyed by fire.new text end

new text beginBuilding materials and supplies used or consumed in, and equipment incorporated into, the construction or replacement of real property affected by, and restaurant equipment to replace equipment destroyed in, the fire on March 11, 2018, in the city of Mazeppa are exempt. The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner provided in section 297A.75. For purposes of this subdivision, "restaurant equipment" includes durable equipment used in a restaurant for food storage, preparation, and serving.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for sales and purchases made after March 11, 2018, and before January 1, 2021.new text end

Sec. 8.

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the following exempt items must be imposed and collected as if the sale were taxable and the rate under section 297A.62, subdivision 1, applied. The exempt items include:

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for sales and purchases made after June 30, 2018.new text end

Sec. 9.

Minnesota Statutes 2016, section 477A.016, is amended to read:

477A.016 NEW TAXES PROHIBITED.

new text begin(a) new text endNo county, city, town or other taxing authority shall increase a present tax or impose a new tax on sales or income.

new text begin(b) No county, city, town, or other taxing authority shall increase a present excise tax or fee or impose a new excise tax or fee on either:new text end

new text begin(1) the manufacture, distribution, wholesale, or retail sale of food, based on volume of product sold, product sales value, or the type of product manufactured, distributed, or sold; ornew text end

new text begin(2) any container used for transporting, protecting, or consuming food.new text end

new text begin(c) For purposes of this section:new text end

new text begin(1) "food" has the meaning given in section 34A.01, subdivision 4; andnew text end

new text begin(2) "container" means a bottle, cup, can, bag, or other packaging that is made from plastic, aluminum, glass, cardboard, or other material.new text end

new text begin(d) This section does not apply to reasonable license fees lawfully imposed by a county, city, town, or other licensing authority in the exercise of its regulatory authority to license a trade, profession, or business.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 10.

EFFECTIVE DATE.

Paragraph (a) is effective retroactively for sales and purchases made after September 30, 2016, and before January 1, deleted text begin2019deleted text endnew text begin 2022new text end. Paragraph (b) is effective for sales and purchases made after September 30, 2016, and before July 1, 2017.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 11. new text beginMUNICIPALLY OWNED WATER TREATMENT FACILITY; CITY OF ELKO NEW MARKET.new text end

new text beginSubdivision 1.new text end

new text beginExemption.new text end

new text beginMaterials and supplies used or consumed in and equipment incorporated into a water treatment facility owned and operated by the city of Elko New Market are exempt from taxation under Minnesota Statutes, chapter 297A, regardless of whether purchased by the city or a contractor, subcontractor, or builder. All purchases for this facility must be made after June 1, 2014, and before June 1, 2016.new text end

new text beginSubd. 2.new text end

new text beginRefund.new text end

new text beginThe tax on purchases exempt under subdivision 1 must be imposed and collected as if the rate under Minnesota Statutes, section 297A.62, applied, and then refunded in the manner provided in Minnesota Statutes, section 297A.75. The applicant must be the city of Elko New Market. Notwithstanding Minnesota Statutes, section 289A.40, subdivision 5, the city of Elko New Market may apply directly to the commissioner of revenue for a refund of the tax paid on items exempt under subdivision 1, the application must be made by December 31, 2018, in the form and manner required by the commissioner, and provide sufficient information so the commissioner can verify the amount paid. If the tax was paid by a contractor, subcontractor, or builder, the contractor, subcontractor, or builder must furnish to the refund applicant a statement including the cost of the exempt items and the taxes paid on the items. Interest must be paid on the refund at the rate in Minnesota Statutes, section 270C.405, from 90 days after the refund claim is filed with the commissioner.new text end

new text beginSubd. 3.new text end

new text beginAppropriation.new text end

new text beginThe amount required to make the refunds under this section is appropriated to the commissioner of revenue.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective retroactively for purchases made after June 1, 2014, and before June 1, 2016.new text end

ARTICLE 5

PROPERTY TAXES

Section 1.

Minnesota Statutes 2016, section 138.053, is amended to read:

138.053 COUNTY HISTORICAL SOCIETY; TAX LEVY; CITIES OR TOWNS.

The governing body of any home rule charter or statutory city or town may annually appropriate from its general fund an amount not to exceed 0.02418 percent of estimated market value, derived from ad valorem taxes on property or other revenues, to be paid to the historical society of its respective new text begincity, town, or new text endcounty to be used for the promotion of historical work and to aid in defraying the expenses of carrying on the historical work in the county. No city or town may appropriate any funds for the benefit of any historical society unless the society is affiliated with and approved by the Minnesota Historical Society.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 2.

Subd. 2.

Records; data privacy.

Pursuant to chapter 13 the county veterans service officer is the responsible authority with respect to all records in the officer's custody. The data on clients' applications for assistance is private data on individuals, as defined in section 13.02, subdivision 12.new text begin The county veterans service officer may disclose to the county assessor private data necessary to determine a client's eligibility for the disabled veteran's homestead market value exclusion under section 273.13, subdivision 34.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 3.

Minnesota Statutes 2016, section 272.02, is amended by adding a subdivision to read:

new text beginSubd. 102.new text end

new text beginCertain property owned by an Indian tribe.new text end

new text begin(a) Property is exempt that:new text end

new text begin(1) is located in a city of the first class with a population of more than 380,000 as of the 2010 federal census;new text end

new text begin(2) was on January 1, 2016, and is for the current assessment, owned by a federally recognized Indian tribe, or its instrumentality, that is located within the state of Minnesota; andnew text end

new text begin(3) is used exclusively as a pharmacy.new text end

new text begin(b) Property that qualifies for the exemption under this subdivision is limited to parcels and structures that do not exceed, in the aggregate, 4,000 square feet. Property acquired for single-family housing, market-rate apartments, agriculture, or forestry does not qualify for this exemption. For assessment year 2018 only, an exemption application under this subdivision is due by July 1, 2018. The exemption created by this subdivision expires with taxes payable in 2028.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2019 and thereafter.new text end

Sec. 4.

Subd. 3a.

Manufactured home park cooperative.

(a) When a manufactured home park is owned by a corporation or association organized under chapter 308A or 308B, and each person who owns a share or shares in the corporation or association is entitled to occupy a lot within the park, the corporation or association may claim homestead treatment for the park. Each lot must be designated by legal description or number, and each lot is limited to not more than one-half acre of land.

(b) The manufactured home park shall be entitled to homestead treatment if all of the following criteria are met:

(1) the occupant or the cooperative corporation or association is paying the ad valorem property taxes and any special assessments levied against the land and structure either directly, or indirectly through dues to the corporation or association; and

(2) the corporation or association organized under chapter 308A or 308B is wholly owned by persons having a right to occupy a lot owned by the corporation or association.

(c) A charitable corporation, organized under the laws of Minnesota with no outstanding stock, and granted a ruling by the Internal Revenue Service for 501(c)(3) tax-exempt status, qualifies for homestead treatment with respect to a manufactured home park if its members hold residential participation warrants entitling them to occupy a lot in the manufactured home park.

Subd. 8.

(a) Each family farm corporation; each joint family farm venture; and each limited liability company or partnership which operates a family farm; is entitled to class 1b under section 273.13, subdivision 22, paragraph (b), or class 2a assessment for one homestead occupied by a shareholder, member, or partner thereof who is residing on the land, and actively engaged in farming of the land owned by the family farm corporation, joint family farm venture, limited liability company, or partnership. Homestead treatment applies even ifnew text begin:new text end

new text begin(1)new text end legal title to the property is in the name of the family farm corporation, joint family farm venture, limited liability company, or partnership, and not in the name of the person residing on itdeleted text begin.deleted text endnew text begin; ornew text end

new text begin(2) the family farm is operated by a business entity other than the business entity that owns the land, provided that both business entities have the same owners.new text end

"Family farm corporation," "family farm," and "partnership operating a family farm" have the meanings given in section 500.24, except that the number of allowable shareholders, members, or partners under this subdivision shall not exceed 12. "Limited liability company" has the meaning contained in sections 322B.03, subdivision 28, or 322C.0102, subdivision 12, and 500.24, subdivision 2, paragraphs (l) and (m). "Joint family farm venture" means a cooperative agreement among two or more farm enterprises authorized to operate a family farm under section 500.24.

new text begin"Business entity" means a corporation, joint venture, partnership, or limited liability company within the meaning of this paragraph.new text end

(b) In addition to property specified in paragraph (a), any other residences owned by family farm corporations, joint family farm ventures, limited liability companies, or partnerships described in paragraph (a) which are located on agricultural land and occupied as homesteads by its shareholders, members, or partners who are actively engaged in farming on behalf of that corporation, joint farm venture, limited liability company, or partnership must also be assessed as class 2a property or as class 1b property under section 273.13.

(c) Agricultural property that is owned by a member, partner, or shareholder of a family farm corporation or joint family farm venture, limited liability company operating a family farm, or by a partnership operating a family farm and leased to the family farm corporation, limited liability company, partnership, or joint farm venture, as defined in paragraph (a), is eligible for classification as class 1b or class 2a under section 273.13, if the owner is actually residing on the property, and is actually engaged in farming the land on behalf of that corporation, joint farm venture, limited liability company, or partnership. This paragraph applies without regard to any legal possession rights of the family farm corporation, joint family farm venture, limited liability company, or partnership under the lease.

(d) Nonhomestead agricultural property that is owned by a family farm corporation, joint farm venture, limited liability company, or partnership; and located not farther than four townships or cities, or combination thereof, from agricultural land that is owned, and used for the purposes of a homestead by an individual who is a shareholder, member, or partner of the corporation, venture, company, or partnership; is entitled to receive the first tier homestead classification rate on any remaining market value in the first homestead class tier that is in excess of the market value of the shareholder's, member's, or partner's class 2 agricultural homestead property, if the owner, or someone acting on the owner's behalf notifies the county assessor by July 1 that the property may be eligible under this paragraph for the current assessment year, for taxes payable in the following year. As used in this paragraph, "agricultural property" means property classified as 2a under section 273.13, along with any contiguous property classified as 2b under section 273.13, if the contiguous 2a and 2b properties are under the same ownership.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for assessments beginning in 2018.new text end

Sec. 6.

Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than ten acres that is the homestead of its owner must be classified as class 2a under section 273.13, subdivision 23, paragraph (a), if:

(1) the parcel on which the house is located is contiguous on at least two sides to (i) agricultural land, (ii) land owned or administered by the United States Fish and Wildlife Service, or (iii) land administered by the Department of Natural Resources on which in lieu taxes are paid under sections 477A.11 to 477A.14;

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least 20 acres;

(3) the noncontiguous land is located not farther than four townships or cities, or a combination of townships or cities from the homestead; and

(4) the agricultural use value of the noncontiguous land and farm buildings is equal to at least 50 percent of the market value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the provisions of this paragraph shall remain classified as class 2a, irrespective of subsequent changes in the use of adjoining properties, as long as the homestead remains under the same ownership, the owner owns a noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use value qualifies under clause (4). Homestead classification under this paragraph is limited to property that qualified under this paragraph for the 1998 assessment.

(b)(i) Agricultural property shall be classified as the owner's homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

(1) the agricultural property consists of at least 40 acres including undivided government lots and correctional 40's;

(2) the owner, the owner's spouse, or a grandchild, child, sibling, or parent of the owner or of the owner's spouse, is actively farming the agricultural property, either on the person's own behalf as an individual or on behalf of a partnership operating a family farm, family farm corporation, joint family farm venture, or limited liability company of which the person is a partner, shareholder, or member;

(3) both the owner of the agricultural property and the person who is actively farming the agricultural property under clause (2), are Minnesota residents;

(4) neither the owner nor the spouse of the owner claims another agricultural homestead in Minnesota; and

(5) neither the owner nor the person actively farming the agricultural property lives farther than four townships or cities, or a combination of four townships or cities, from the agricultural property, except that if the owner or the owner's spouse is required to live in employer-provided housing, the owner or owner's spouse, whichever is actively farming the agricultural property, may live more than four townships or cities, or combination of four townships or cities from the agricultural property.

The relationship under this paragraph may be either by blood or marriage.

(ii) deleted text beginAgricultural property held by a trustee under a trust is eligible for agricultural homestead classification under this paragraph if the qualifications in clause (i) are met, except that "owner" means the grantor of the trust.deleted text end

deleted text begin(iii)deleted text end Property containing the residence of an owner who owns qualified property under clause (i) shall be classified as part of the owner's agricultural homestead, if that property is also used for noncommercial storage or drying of agricultural crops.

deleted text begin(iv)deleted text endnew text begin (iii)new text end As used in this paragraph, "agricultural property" means class 2a property and any class 2b property that is contiguous to and under the same ownership as the class 2a property.

(c) Noncontiguous land shall be included as part of a homestead under section 273.13, subdivision 23, paragraph (a), only if the homestead is classified as class 2a and the detached land is located in the same township or city, or not farther than four townships or cities or combination thereof from the homestead. Any taxpayer of these noncontiguous lands must notify the county assessor that the noncontiguous land is part of the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer must also notify the assessor of the other county.

(d) Agricultural land used for purposes of a homestead and actively farmed by a person holding a vested remainder interest in it must be classified as a homestead under section 273.13, subdivision 23, paragraph (a). If agricultural land is classified class 2a, any other dwellings on the land used for purposes of a homestead by persons holding vested remainder interests who are actively engaged in farming the property, and up to one acre of the land surrounding each homestead and reasonably necessary for the use of the dwelling as a home, must also be assessed class 2a.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the April 1997 floods;

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman, or Wilkin;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1997 assessment year and continue to be used for agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 30 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 1997 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth, Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to a March 29, 1998, tornado, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling. For taxes payable in 1999, the owner must notify the assessor by December 1, 1998. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(g) Agricultural property of a family farm corporation, joint family farm venture, family farm limited liability company, or partnership operating a family farm as described under subdivision 8 shall be classified homestead, to the same extent as other agricultural homestead property, if all of the following criteria are met:

(1) the property consists of at least 40 acres including undivided government lots and correctional 40's;

(2) a shareholder, member, or partner of that entity is actively farming the agricultural property;

(3) that shareholder, member, or partner who is actively farming the agricultural property is a Minnesota resident;

(4) neither that shareholder, member, or partner, nor the spouse of that shareholder, member, or partner claims another agricultural homestead in Minnesota; and

(5) that shareholder, member, or partner does not live farther than four townships or cities, or a combination of four townships or cities, from the agricultural property.

new text beginHomestead treatment applies under this paragraph even if:new text end

new text begin(i) the shareholder, member, or partner of that entity is actively farming the agricultural property on the shareholder's, member's, or partner's own behalf; ornew text end

new text begin(ii) the family farm is operated by a business entity other than the business entity that owns the land, provided that both business entities have the same owners. For purposes of this paragraph, "business entity" means a corporation, joint venture, partnership, or limited liability company within the meaning of subdivision 8, paragraph (a).new text end

Homestead treatment applies under this paragraph for property leased to a family farm corporation, joint farm venture, limited liability company, or partnership operating a family farm if legal title to the property is in the name of an individual who is a member, shareholder, or partner in the entity.

(h) To be eligible for the special agricultural homestead under this subdivision, an initial full application must be submitted to the county assessor where the property is located. Owners and the persons who are actively farming the property shall be required to complete only a one-page abbreviated version of the application in each subsequent year provided that none of the following items have changed since the initial application:

(2) the owners and the persons actively farming the property continue to live within the four townships or city criteria and are Minnesota residents;

(3) the same operator of the agricultural property is listed with the Farm Service Agency;

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a federal or state farm program since the initial application.

The owners and any persons who are actively farming the property must include the appropriate Social Security numbers, and sign and date the application. If any of the specified information has changed since the full application was filed, the owner must notify the assessor, and must complete a new application to determine if the property continues to qualify for the special agricultural homestead. The commissioner of revenue shall prepare a standard reapplication form for use by the assessors.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of damage caused by the August 2007 floods;

(2) the property is located in the county of Dodge, Fillmore, Houston, Olmsted, Steele, Wabasha, or Winona;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2007 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the August 2007 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in homestead dwelling. For taxes payable in 2009, the owner must notify the assessor by December 1, 2008. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

(1) the property owner abandoned the homestead dwelling located on the agricultural homestead as a result of the March 2009 floods;

(2) the property is located in the county of Marshall;

(3) the agricultural land and buildings remain under the same ownership for the current assessment year as existed for the 2008 assessment year and continue to be used for agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 50 miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 2009 floods, and the owner furnishes the assessor any information deemed necessary by the assessor in verifying the change in dwelling. Further notifications to the assessor are not required if the property continues to meet all the requirements in this paragraph and any dwellings on the agricultural land remain uninhabited.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning for property taxes payable in 2019.new text end

Sec. 7.

Subd. 21.

Trust property; homestead.

Real or personal propertynew text begin, including agricultural property,new text end held by a trustee under a trust is eligible for classification as homestead property if the property satisfies the requirements of paragraph (a), (b), (c), deleted text beginordeleted text end (d)new text begin, or (e)new text end.

(a) The grantor or surviving spouse of the grantor of the trust occupies and uses the property as a homestead.

(b) A relative or surviving relative of the grantor who meets the requirements of subdivision 1, paragraph (c), in the case of residential real estate; or subdivision 1, paragraph (d), in the case of agricultural property, occupies and uses the property as a homestead.

(c) A family farm corporation, joint farm venture, limited liability company, or partnership operating a family farm in which the grantor or the grantor's surviving spouse is a shareholder, member, or partner rents the property; and, either (1) a shareholder, member, or partner of the corporation, joint farm venture, limited liability company, or partnership occupies and uses the property as a homestead; or (2) the property is at least 40 acres, including undivided government lots and correctional 40's, and a shareholder, member, or partner of the tenant-entity is actively farming the property on behalf of the corporation, joint farm venture, limited liability company, or partnership.

(d) A person who has received homestead classification for property taxes payable in 2000 on the basis of an unqualified legal right under the terms of the trust agreement to occupy the property as that person's homestead and who continues to use the property as a homestead; or, a person who received the homestead classification for taxes payable in 2005 under paragraph (c) who does not qualify under paragraph (c) for taxes payable in 2006 or thereafter but who continues to qualify under paragraph (c) as it existed for taxes payable in 2005.

new text begin(e) The qualifications under subdivision 14, paragraph (b), clause (i), are met. For purposes of this paragraph, "owner" means the grantor of the trust or the surviving spouse of the grantor.new text end

new text begin(f) For purposes of this subdivision, the following terms have the meanings given them:new text end

new text begin(1) "agricultural property" means the house, garage, other farm buildings and structures, and agricultural land;new text end

new text begin(2) "agricultural land" has the meaning given in section 273.13, subdivision 23, except that the phrases "owned by same person" or "under the same ownership" as used in that subdivision mean and include contiguous tax parcels owned by:new text end

new text begin(i) an individual and a trust of which the individual, the individual's spouse, or the individual's deceased spouse is the grantor; ornew text end

new text begin(ii) different trusts of which the grantors of each trust are any combination of an individual, the individual's spouse, or the individual's deceased spouse; andnew text end

deleted text beginFor purposes of this subdivision,deleted text endnew text begin (3)new text end "grantor" deleted text beginis defined asdeleted text endnew text begin meansnew text end the person creating or establishing a testamentary, inter Vivos, revocable or irrevocable trust by written instrument or through the exercise of a power of appointment.

new text begin(g) Noncontiguous agricultural land is included as part of a homestead under this subdivision, only if the homestead is classified as class 2a, as defined in section 273.13, subdivision 23, and the detached land is located in the same township or city, or not farther than four townships or cities or combination thereof from the homestead. Any taxpayer of these noncontiguous agricultural lands must notify the county assessor by December 15 for taxes payable in the following year that the noncontiguous agricultural land is part of the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer must also notify the assessor of the other county.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning for property taxes payable in 2019.new text end

Sec. 8.

Minnesota Statutes 2016, section 273.124, is amended by adding a subdivision to read:

new text beginSubd. 23.new text end

new text beginFractional homesteads.new text end

new text beginIn the case of property that is classified as part homestead and part nonhomestead solely because not all the owners occupy or farm the property, not all the owners have qualifying relatives occupying or farming the property, or not all the spouses of owners occupy the property, the portions of property classified as part homestead and part nonhomestead must correspond to the ownership percentages that each owner has in the property, as determined by the land records in the county recorder's office or registrar of titles. If the ownership percentages of each owner cannot be determined by reference to the land records, the portions of property classified as part homestead and part nonhomestead must correspond to the ownership percentages each owner would have if they each owned an equal share of the property.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for assessments beginning in 2018.new text end

Sec. 9.

Subd. 2.

Disclosure.

The assessor shall disclose the data described in subdivision 1 to the commissioner of revenue as provided by law. The assessor shall also disclose all or portions of the data described in subdivision 1 tonew text begin:new text end

new text begin(1)new text end the county treasurer solely for the purpose of proceeding under the Revenue Recapture Act to recover personal property taxes owingnew text begin; andnew text end

new text begin(2) the county veterans service officer for the purpose of determining a person's eligibility for the disabled veteran's homestead market value exclusion under section 273.13, subdivision 34new text end.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

Sec. 10.

Subd. 22.

Class 1.

(a) Except as provided in subdivision 23 and in paragraphs (b) and (c), real estate which is residential and used for homestead purposes is class 1a. In the case of a duplex or triplex in which one of the units is used for homestead purposes, the entire property is deemed to be used for homestead purposes. The market value of class 1a property must be determined based upon the value of the house, garage, and land.

The first $500,000 of market value of class 1a property has a net classification rate of one percent of its market value; and the market value of class 1a property that exceeds $500,000 has a classification rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or homestead manufactured homes used for the purposes of a homestead by:

(1) any person who is blind as defined in section 256D.35, or the blind person and the blind person's spouse;

(2) any person who is permanently and totally disabled or by the disabled person and the disabled person's spouse; or

(3) the surviving spouse of a permanently and totally disabled veteran homesteading a property classified under this paragraph for taxes payable in 2008.

Property is classified and assessed under clause (2) only if the government agency or income-providing source certifies, upon the request of the homestead occupant, that the homestead occupant satisfies the disability requirements of this paragraph, and that the property is not eligible for the valuation exclusion under subdivision 34.

Property is classified and assessed under paragraph (b) only if the commissioner of revenue or the county assessor certifies that the homestead occupant satisfies the requirements of this paragraph.

Permanently and totally disabled for the purpose of this subdivision means a condition which is permanent in nature and totally incapacitates the person from working at an occupation which brings the person an income. The first $50,000 market value of class 1b property has a net classification rate of .45 percent of its market value. The remaining market value of class 1b property is classified as class 1a or class 2a property, whichever is appropriate.

(c) Class 1c property is commercial use real and personal property that abuts public water as defined in section 103G.005, subdivision 15, or abuts a state trail administered by the Department of Natural Resources, and is devoted to temporary and seasonal residential occupancy for recreational purposes but not devoted to commercial purposes for more than 250 days in the year preceding the year of assessment, and that includes a portion used as a homestead by the owner, which includes a dwelling occupied as a homestead by a shareholder of a corporation that owns the resort, a partner in a partnership that owns the resort, or a member of a limited liability company that owns the resort deleted text begineven ifdeleted text endnew text begin, whethernew text end the title to the homestead is held by the corporation, partnership, or limited liability companynew text begin, or by a shareholder of a corporation that owns the resort, a partner in a partnership that owns the resort, or a member of a limited liability company that owns the resortnew text end. For purposes of this paragraph, property is devoted to a commercial purpose on a specific day if any portion of the property, excluding the portion used exclusively as a homestead, is used for residential occupancy and a fee is charged for residential occupancy. Class 1c property must contain three or more rental units. A "rental unit" is defined as a cabin, condominium, townhouse, sleeping room, or individual camping site equipped with water and electrical hookups for recreational vehicles. Class 1c property must provide recreational activities such as the rental of ice fishing houses, boats and motors, snowmobiles, downhill or cross-country ski equipment; provide marina services, launch services, or guide services; or sell bait and fishing tackle. Any unit in which the right to use the property is transferred to an individual or entity by deeded interest, or the sale of shares or stock, no longer qualifies for class 1c even though it may remain available for rent. A camping pad offered for rent by a property that otherwise qualifies for class 1c is also class 1c, regardless of the term of the rental agreement, as long as the use of the camping pad does not exceed 250 days. If the same owner owns two separate parcels that are located in the same township, and one of those properties is classified as a class 1c property and the other would be eligible to be classified as a class 1c property if it was used as the homestead of the owner, both properties will be assessed as a single class 1c property; for purposes of this sentence, properties are deemed to be owned by the same owner if each of them is owned by a limited liability company, and both limited liability companies have the same membership. The portion of the property used as a homestead is class 1a property under paragraph (a). The remainder of the property is classified as follows: the first $600,000 of market value is tier I, the next $1,700,000 of market value is tier II, and any remaining market value is tier III. The classification rates for class 1c are: tier I, 0.50 percent; tier II, 1.0 percent; and tier III, 1.25 percent. Owners of real and personal property devoted to temporary and seasonal residential occupancy for recreation purposes in which all or a portion of the property was devoted to commercial purposes for not more than 250 days in the year preceding the year of assessment desiring classification as class 1c, mustnew text begin, by January 15 of the assessment year,new text end submit a declaration to the assessor designatingnew text begin: (1)new text end the cabins or units occupied for 250 days or less in the year preceding the year of assessment deleted text beginby January 15 of the assessment yeardeleted text endnew text begin; and (2) the portion of the resort used as a homestead and the owner of the homestead under the titlenew text end. Those cabins or units and a proportionate share of the land on which they are located must be designated as class 1c as otherwise provided. The remainder of the cabins or units and a proportionate share of the land on which they are located must be designated as class 3a commercial. The owner of property desiring designation as class 1c property must provide guest registers or other records demonstrating that the units for which class 1c designation is sought were not occupied for more than 250 days in the year preceding the assessment if so requested. The portion of a property operated as a (1) restaurant, (2) bar, (3) gift shop, (4) conference center or meeting room, and (5) other nonresidential facility operated on a commercial basis not directly related to temporary and seasonal residential occupancy for recreation purposes does not qualify for class 1c.

(d) Class 1d property includes structures that meet all of the following criteria:

(1) the structure is located on property that is classified as agricultural property under section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm workers during the time when they work on that farm, and the occupants are not charged rent for the privilege of occupying the property, provided that use of the structure for storage of farm equipment and produce does not disqualify the property from classification under this paragraph;

(3) the structure meets all applicable health and safety requirements for the appropriate season; and

(4) the structure is not salable as residential property because it does not comply with local ordinances relating to location in relation to streets or roads.

The market value of class 1d property has the same classification rates as class 1a property under paragraph (a).

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2020.new text end

Sec. 11.

Subd. 23.

Class 2.

(a) An agricultural homestead consists of class 2a agricultural land that is homesteaded, along with any class 2b rural vacant land that is contiguous to the class 2a land under the same ownership. The market value of the house and garage and immediately surrounding one acre of land has the same classification rates as class 1a or 1b property under subdivision 22. The value of the remaining land including improvements up to the first tier valuation limit of agricultural homestead property has a classification rate of 0.5 percent of market value. The remaining property over the first tier has a classification rate of one percent of market value. For purposes of this subdivision, the "first tier valuation limit of agricultural homestead property" and "first tier" means the limit certified under section 273.11, subdivision 23.

(b) Class 2a agricultural land consists of parcels of property, or portions thereof, that are agricultural land and buildings. Class 2a property has a classification rate of one percent of market value, unless it is part of an agricultural homestead under paragraph (a). Class 2a property must also include any property that would otherwise be classified as 2b, but is interspersed with class 2a property, including but not limited to sloughs, wooded wind shelters, acreage abutting ditches, ravines, rock piles, land subject to a setback requirement, and other similar land that is impractical for the assessor to value separately from the rest of the property or that is unlikely to be able to be sold separately from the rest of the property.

An assessor may classify the part of a parcel described in this subdivision that is used for agricultural purposes as class 2a and the remainder in the class appropriate to its use.

(c) Class 2b rural vacant land consists of parcels of property, or portions thereof, that are unplatted real estate, rural in character and not used for agricultural purposes, including land used for growing trees for timber, lumber, and wood and wood products, that is not improved with a structure. The presence of a minor, ancillary nonresidential structure as defined by the commissioner of revenue does not disqualify the property from classification under this paragraph. Any parcel of 20 acres or more improved with a structure that is not a minor, ancillary nonresidential structure must be split-classified, and ten acres must be assigned to the split parcel containing the structure. Class 2b property has a classification rate of one percent of market value unless it is part of an agricultural homestead under paragraph (a), or qualifies as class 2c under paragraph (d).

(d) Class 2c managed forest land consists of no less than 20 and no more than 1,920 acres statewide per taxpayer that is being managed under a forest management plan that meets the requirements of chapter 290C, but is not enrolled in the sustainable forest resource management incentive program. It has a classification rate of .65 percent, provided that the owner of the property must apply to the assessor in order for the property to initially qualify for the reduced rate and provide the information required by the assessor to verify that the property qualifies for the reduced rate. If the assessor receives the application and information before May 1 in an assessment year, the property qualifies beginning with that assessment year. If the assessor receives the application and information after April 30 in an assessment year, the property may not qualify until the next assessment year. The commissioner of natural resources must concur that the land is qualified. The commissioner of natural resources shall annually provide county assessors verification information on a timely basis. The presence of a minor, ancillary nonresidential structure as defined by the commissioner of revenue does not disqualify the property from classification under this paragraph.

(e) Agricultural land as used in this section means:

(1) contiguous acreage of ten acres or more, used during the preceding year for agricultural purposes; or

(2) contiguous acreage used during the preceding year for an intensive livestock or poultry confinement operation, provided that land used only for pasturing or grazing does not qualify under this clause.

"Agricultural purposes" as used in this section means the raising, cultivation, drying, or storage of agricultural products for sale, or the storage of machinery or equipment used in support of agricultural production by the same farm entity. For a property to be classified as agricultural based only on the drying or storage of agricultural products, the products being dried or stored must have been produced by the same farm entity as the entity operating the drying or storage facility. "Agricultural purposes" also includes new text begin(i) new text endenrollment in a local conservation program or the Reinvest in Minnesota program under sections 103F.501 to 103F.535 or the federal Conservation Reserve Program as contained in Public Law 99-198 or a similar state or federal conservation program if the property was classified as agricultural deleted text begin(i)deleted text endnew text begin (A)new text end under this subdivision for taxes payable in 2003 because of its enrollment in a qualifying program and the land remains enrolled or deleted text begin(ii)deleted text endnew text begin (B)new text end in the year prior to its enrollmentnew text begin, or (ii) use of land, not to exceed the greater of three acres or ten percent of the total land area, to provide environmental benefits such as buffer strips, old growth forest restoration or retention, or retention ponds to prevent soil erosion. For the purposes of item (ii), "total land area" means contiguous parcels under common ownershipnew text end. For purposes of this section, a "local conservation program" means a program administered by a town, statutory or home rule charter city, or county, including a watershed district, water management organization, or soil and water conservation district, in which landowners voluntarily enroll land and receive incentive payments equal to at least $50 per acre in exchange for use or other restrictions placed on the land. In order for property to qualify under the local conservation program provision, a taxpayer must apply to the assessor by February 1 of the assessment year and must submit the information required by the assessor, including but not limited to a copy of the program requirements, the specific agreement between the land owner and the local agency, if applicable, and a map of the conservation area. Agricultural classification shall not be based upon the market value of any residential structures on the parcel or contiguous parcels under the same ownership.

new text begin"Agricultural purposes" also includes land consisting of a holding pond designed to prevent runoff onto a divided four-lane expressway that is located at least 150 feet above the expressway, as certified by the local soil and water conservation district in accordance with USDA Field Office Technical Guide conservation practice standards, provided that the land is located outside the metropolitan area as defined in section 473.121, and was classified as agricultural in assessment year 2017.new text end

"Contiguous acreage," for purposes of this paragraph, means all of, or a contiguous portion of, a tax parcel as described in section 272.193, or all of, or a contiguous portion of, a set of contiguous tax parcels under that section that are owned by the same person.

(f) Agricultural land under this section also includes:

(1) contiguous acreage that is less than ten acres in size and exclusively used in the preceding year for raising or cultivating agricultural products; or

(2) contiguous acreage that contains a residence and is less than 11 acres in size, if the contiguous acreage exclusive of the house, garage, and surrounding one acre of land was used in the preceding year for one or more of the following three uses:

(i) for an intensive grain drying or storage operation, or for intensive machinery or equipment storage activities used to support agricultural activities on other parcels of property operated by the same farming entity;

(ii) as a nursery, provided that only those acres used intensively to produce nursery stock are considered agricultural land; or

(iii) for intensive market farming; for purposes of this paragraph, "market farming" means the cultivation of one or more fruits or vegetables or production of animal or other agricultural products for sale to local markets by the farmer or an organization with which the farmer is affiliated.

"Contiguous acreage," for purposes of this paragraph, means all of a tax parcel as described in section 272.193, or all of a set of contiguous tax parcels under that section that are owned by the same person.

(g) Land shall be classified as agricultural even if all or a portion of the agricultural use of that property is the leasing to, or use by another person for agricultural purposes.

Classification under this subdivision is not determinative for qualifying under section 273.111.

(h) The property classification under this section supersedes, for property tax purposes only, any locally administered agricultural policies or land use restrictions that define minimum or maximum farm acreage.

(i) The term "agricultural products" as used in this subdivision includes production for sale of:

(2) aquacultural products for sale and consumption, as defined under section 17.47, if the aquaculture occurs on land zoned for agricultural use;

(3) the commercial boarding of horses, which may include related horse training and riding instruction, if the boarding is done on property that is also used for raising pasture to graze horses or raising or cultivating other agricultural products as defined in clause (1);

(4) property which is owned and operated by nonprofit organizations used for equestrian activities, excluding racing;

(5) game birds and waterfowl bred and raised (i) on a game farm licensed under section 97A.105, provided that the annual licensing report to the Department of Natural Resources, which must be submitted annually by March 30 to the assessor, indicates that at least 500 birds were raised or used for breeding stock on the property during the preceding year and that the owner provides a copy of the owner's most recent schedule F; or (ii) for use on a shooting preserve licensed under section 97A.115;

(6) insects primarily bred to be used as food for animals;

(7) trees, grown for sale as a crop, including short rotation woody crops, and not sold for timber, lumber, wood, or wood products; and

(8) maple syrup taken from trees grown by a person licensed by the Minnesota Department of Agriculture under chapter 28A as a food processor.

(j) If a parcel used for agricultural purposes is also used for commercial or industrial purposes, including but not limited to:

(1) wholesale and retail sales;

(2) processing of raw agricultural products or other goods;

(3) warehousing or storage of processed goods; and

(4) office facilities for the support of the activities enumerated in clauses (1), (2), and (3),

the assessor shall classify the part of the parcel used for agricultural purposes as class 1b, 2a, or 2b, whichever is appropriate, and the remainder in the class appropriate to its use. The grading, sorting, and packaging of raw agricultural products for first sale is considered an agricultural purpose. A greenhouse or other building where horticultural or nursery products are grown that is also used for the conduct of retail sales must be classified as agricultural if it is primarily used for the growing of horticultural or nursery products from seed, cuttings, or roots and occasionally as a showroom for the retail sale of those products. Use of a greenhouse or building only for the display of already grown horticultural or nursery products does not qualify as an agricultural purpose.

(k) The assessor shall determine and list separately on the records the market value of the homestead dwelling and the one acre of land on which that dwelling is located. If any farm buildings or structures are located on this homesteaded acre of land, their market value shall not be included in this separate determination.

(l) Class 2d airport landing area consists of a landing area or public access area of a privately owned public use airport. It has a classification rate of one percent of market value. To qualify for classification under this paragraph, a privately owned public use airport must be licensed as a public airport under section 360.018. For purposes of this paragraph, "landing area" means that part of a privately owned public use airport properly cleared, regularly maintained, and made available to the public for use by aircraft and includes runways, taxiways, aprons, and sites upon which are situated landing or navigational aids. A landing area also includes land underlying both the primary surface and the approach surfaces that comply with all of the following:

(i) the land is properly cleared and regularly maintained for the primary purposes of the landing, taking off, and taxiing of aircraft; but that portion of the land that contains facilities for servicing, repair, or maintenance of aircraft is not included as a landing area;

(ii) the land is part of the airport property; and

(iii) the land is not used for commercial or residential purposes.

The land contained in a landing area under this paragraph must be described and certified by the commissioner of transportation. The certification is effective until it is modified, or until the airport or landing area no longer meets the requirements of this paragraph. For purposes of this paragraph, "public access area" means property used as an aircraft parking ramp, apron, or storage hangar, or an arrival and departure building in connection with the airport.

(m) Class 2e consists of land with a commercial aggregate deposit that is not actively being mined and is not otherwise classified as class 2a or 2b, provided that the land is not located in a county that has elected to opt-out of the aggregate preservation program as provided in section 273.1115, subdivision 6. It has a classification rate of one percent of market value. To qualify for classification under this paragraph, the property must be at least ten contiguous acres in size and the owner of the property must record with the county recorder of the county in which the property is located an affidavit containing:

(1) a legal description of the property;

(2) a disclosure that the property contains a commercial aggregate deposit that is not actively being mined but is present on the entire parcel enrolled;

(3) documentation that the conditional use under the county or local zoning ordinance of this property is for mining; and

(4) documentation that a permit has been issued by the local unit of government or the mining activity is allowed under local ordinance. The disclosure must include a statement from a registered professional geologist, engineer, or soil scientist delineating the deposit and certifying that it is a commercial aggregate deposit.

For purposes of this section and section 273.1115, "commercial aggregate deposit" means a deposit that will yield crushed stone or sand and gravel that is suitable for use as a construction aggregate; and "actively mined" means the removal of top soil and overburden in preparation for excavation or excavation of a commercial deposit.

(n) When any portion of the property under this subdivision or subdivision 22 begins to be actively mined, the owner must file a supplemental affidavit within 60 days from the day any aggregate is removed stating the number of acres of the property that is actively being mined. The acres actively being mined must be (1) valued and classified under subdivision 24 in the next subsequent assessment year, and (2) removed from the aggregate resource preservation property tax program under section 273.1115, if the land was enrolled in that program. Copies of the original affidavit and all supplemental affidavits must be filed with the county assessor, the local zoning administrator, and the Department of Natural Resources, Division of Land and Minerals. A supplemental affidavit must be filed each time a subsequent portion of the property is actively mined, provided that the minimum acreage change is five acres, even if the actual mining activity constitutes less than five acres.

(o) The definitions prescribed by the commissioner under paragraphs (c) and (d) are not rules and are exempt from the rulemaking provisions of chapter 14, and the provisions in section 14.386 concerning exempt rules do not apply.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for assessment year 2019 and thereafter.new text end

Sec. 12.

Subd. 34.

Homestead of disabled veteran or family caregiver.

(a) All or a portion of the market value of property owned by a veteran and serving as the veteran's homestead under this section is excluded in determining the property's taxable market value if the veteran has a service-connected disability of 70 percent or more as certified by the United States Department of Veterans Affairs. To qualify for exclusion under this subdivision, the veteran must have been honorably discharged from the United States armed forces, as indicated by United States Government Form DD214 or other official military discharge papers.

(b)(1) For a disability rating of 70 percent or more, $150,000 of market value is excluded, except as provided in clause (2); and

(2) for a total (100 percent) and permanent disability, $300,000 of market value is excluded.

(c) If a disabled veteran qualifying for a valuation exclusion under paragraph (b), clause (2), predeceases the veteran's spouse, and if upon the death of the veteran the spouse holds the legal or beneficial title to the homestead and permanently resides there, the exclusion shall carry over to the benefit of the veteran's spouse for the current taxes payable year and for eight additional taxes payable years or until such time as the spouse remarries, or sells, transfers, or otherwise disposes of the property, whichever comes firstnew text begin, except as otherwise provided in paragraph (n)new text end. Qualification under this paragraph requires an application under paragraph (h), and a spouse must notify the assessor if there is a change in the spouse's marital status, ownership of the property, or use of the property as a permanent residence.

(d) If the spouse of a member of any branch or unit of the United States armed forces who dies due to a service-connected cause while serving honorably in active service, as indicated on United States Government Form DD1300 or DD2064, holds the legal or beneficial title to a homestead and permanently resides there, the spouse is entitled to the benefit described in paragraph (b), clause (2), for eight taxes payable years, or until such time as the spouse remarries or sells, transfers, or otherwise disposes of the property, whichever comes firstnew text begin, except as otherwise provided in paragraph (n)new text end.

(e) If a veteran meets the disability criteria of paragraph (a) but does not own property classified as homestead in the state of Minnesota, then the homestead of the veteran's primary family caregiver, if any, is eligible for the exclusion that the veteran would otherwise qualify for under paragraph (b).

(f) In the case of an agricultural homestead, only the portion of the property consisting of the house and garage and immediately surrounding one acre of land qualifies for the valuation exclusion under this subdivision.

(g) A property qualifying for a valuation exclusion under this subdivision is not eligible for the market value exclusion under subdivision 35, or classification under subdivision 22, paragraph (b).

(h) To qualify for a valuation exclusion under this subdivision a property owner must apply to the assessor by deleted text beginJuly 1deleted text endnew text begin December 15new text end of the first assessment year for which the exclusion is sought. For an application received after deleted text beginJuly 1deleted text endnew text begin December 15new text end, the exclusion shall become effective for the following assessment year. Except as provided in paragraph (c), the owner of a property that has been accepted for a valuation exclusion must notify the assessor if there is a change in ownership of the property or in the use of the property as a homestead.new text begin When a property qualifying for a market value exclusion under this subdivision is sold or transferred, the exclusion must be removed for the current assessment year, provided that the new owner may file a claim for an exclusion if eligible.new text end

(i) A first-time application by a qualifying spouse for the market value exclusion under paragraph (d) must be made any time within two years of the death of the service member.

(2) "own" means that the person's name is present as an owner on the property deed;

(3) "primary family caregiver" means a person who is approved by the secretary of the United States Department of Veterans Affairs for assistance as the primary provider of personal care services for an eligible veteran under the Program of Comprehensive Assistance for Family Caregivers, codified as United States Code, title 38, section 1720G; and

(k) If a veteran dying after December 31, 2011, did not apply for or receive the exclusion under paragraph (b), clause (2), before dying, the veteran's spouse is entitled to the benefit under paragraph (b), clause (2), for eight taxes payable years or until the spouse remarries or sells, transfers, or otherwise disposes of the propertynew text begin, except as otherwise provided in paragraph (n),new text end if:

(1) the spouse files a first-time application within two years of the death of the service member or by June 1, 2019, whichever is later;

(2) upon the death of the veteran, the spouse holds the legal or beneficial title to the homestead and permanently resides there;

(3) the veteran met the honorable discharge requirements of paragraph (a); and

(4) the United States Department of Veterans Affairs certifies that:

(i) the veteran met the total (100 percent) and permanent disability requirement under paragraph (b), clause (2); or

(ii) the spouse has been awarded dependency and indemnity compensation.

(l) The purpose of this provision of law providing a level of homestead property tax relief for gravely disabled veterans, their primary family caregivers, and their surviving spouses is to help ease the burdens of war for those among our state's citizens who bear those burdens most heavily.

(m) By July 1, the county veterans service officer must certify the disability rating and permanent address of each veteran receiving the benefit under paragraph (b) to the assessor.

new text begin(n) A spouse who received the benefit in paragraph (c), (d), or (k) but no longer holds the legal or beneficial title to the property may continue to receive the exclusion for a property other than the property for which the exclusion was initially granted until the spouse remarries or sells, transfers, or otherwise disposes of the property, provided that:new text end

new text begin(1) the spouse applies under paragraph (h) for the continuation of the exclusion allowed under this paragraph;new text end

new text begin(2) the spouse holds the legal or beneficial title to the property for which the continuation of the exclusion is sought under this paragraph, and permanently resides there;new text end

new text begin(3) the estimated market value of the property for which the exclusion is sought under this paragraph is less than or equal to the estimated market value of the property that first received the exclusion, based on the value of each property on the date of the sale of the property that first received the exclusion; andnew text end

new text begin(4) the spouse has not previously received the benefit under this paragraph for a property other than the property for which the exclusion is sought.new text end

new text beginThe exclusion for a spouse under this paragraph and paragraph (c), (d), or (k) may not exceed a total of eight taxes payable years.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with assessments in 2018, for taxes payable in 2019.new text end

Sec. 13.

Subd. 35.

Homestead market value exclusion.

(a) Prior to determining a property's net tax capacity under this section, property classified as class 1a or 1b under subdivision 22, and the portion of property classified as class 2a under subdivision 23 consisting of the house, garage, and surrounding one acre of land, shall be eligible for a market value exclusion as determined under paragraph (b).

(b) For a homestead valued at $76,000 or less, the exclusion is 40 percent of market value. For a homestead valued between $76,000 and $413,800, the exclusion is $30,400 minus nine percent of the valuation over $76,000. For a homestead valued at $413,800 or more, there is no valuation exclusion. The valuation exclusion shall be rounded to the nearest whole dollar, and may not be less than zero.

(c) Any valuation exclusions or adjustments under section 273.11 shall be applied prior to determining the amount of the valuation exclusion under this subdivision.

(d) In the case of a property that is classified as part homestead and part nonhomestead, (i) the exclusion shall apply only to the homestead portion of the property, but (ii) if a portion of a property is classified as nonhomestead solely because not all the owners occupy the property, not all the owners have qualifying relatives occupying the property, or solely because not all the spouses of owners occupy the property, the exclusion amount shall be initially computed as if that nonhomestead portion were also in the homestead class and then prorated to the owner-occupant's percentage of ownershipnew text begin, as determined by section 273.124, subdivision 23new text end. For the purpose of this section, when an owner-occupant's spouse does not occupy the property, the percentage of ownership for the owner-occupant spouse is one-half of the couple's ownership percentage.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxes payable in 2019 and thereafter.new text end

Sec. 14.

Subd. 2.

Agricultural homestead market value credit.

Property classified as agricultural homestead under section 273.13, subdivision 23, paragraph (a), is eligible for an agricultural credit. The credit is computed using the property's agricultural credit market value, defined for this purpose as the property's market value excluding the market value of the house, garage, and immediately surrounding one acre of land. The credit is equal to 0.3 percent of the first $115,000 of the property's agricultural credit market value plus 0.1 percent of the property's agricultural credit market value in excess of $115,000, subject to a maximum credit of $490new text begin for a full agricultural homesteadnew text end. In the case of property that is classified as part homestead and part nonhomestead solely because not all the owners occupy or farm the property, not all the owners have qualifying relatives occupying or farming the property, or solely because not all the spouses of owners occupy the property, the credit is computed on the amount of agricultural credit market value corresponding to the new text beginowner-occupant's new text endpercentage of deleted text beginhomestead. the percentage of homestead is equal to 100 divided by the number of owners of the property, or, in the case of a trust, the number of grantors of the trust that owns the property.deleted text endnew text begin ownership, as determined by section 273.124, subdivision 23, and the maximum credit equals $490 multiplied by the percentage of ownership.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for taxes payable in 2019 and thereafter.new text end

Sec. 15.

Minnesota Statutes 2016, section 275.025, is amended by adding a subdivision to read:

new text beginSubd. 6.new text end

new text beginNatural gas pipeline.new text end

new text begin(a) The county must abate the state general levy on personal property that is part of an intrastate natural gas transportation or distribution pipeline system if:new text end

new text begin(1) construction of the pipeline system commenced after January 1, 2018; andnew text end

new text begin(2) the pipeline system provides service to an area:new text end

new text begin(ii) in which the majority of households or businesses lacked access to natural gas distribution systems as of January 1, 2018.new text end

new text begin(b) In the first year that a taxpayer seeks an abatement under this subdivision, the taxpayer must file an application with the commissioner of revenue by March 1 of the assessment year on a form prescribed by the commissioner.new text end

new text begin(c) The commissioner of revenue must notify any affected county in the first year that a pipeline system becomes eligible for an abatement under this subdivision.new text end

new text begin(d) The abatement under this subdivision applies for a period not to exceed 12 years, provided that once a property no longer qualifies, it may not subsequently qualify for an abatement under this subdivision.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2020.new text end

Sec. 16.

Minnesota Statutes 2016, section 275.025, is amended by adding a subdivision to read:

new text beginSubd. 7.new text end

new text beginMedical facility in underserved area.new text end

new text beginThe state general levy for any property qualifying under section 469.1817 is abated. The net tax capacity of the property must be included in the definition of commercial-industrial tax capacity for the purposes of determining the state general levy tax rate under subdivision 4.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2019.new text end

Sec. 17.

Subd. 6.

Duties of commissioner after sale.

new text begin(a) new text endWhen any sale has been made by the county auditor under sections 282.01 to 282.13, the auditor shall immediately certify to the commissioner of revenue such information relating to such sale, on such forms as the commissioner of revenue may prescribe as will enable the commissioner of revenue to prepare an appropriate deed if the sale is for cash, or keep necessary records if the sale is on terms; and not later than October 31 of each year the county auditor shall submit to the commissioner of revenue a statement of all instances wherein any payment of principal, interest, or current taxes on lands held under certificate, due or to be paid during the preceding calendar years, are still outstanding at the time such certificate is made. When such statement shows that a purchaser or the purchaser's assignee is in default, the commissioner of revenue may instruct the county board of the county in which the land is located to cancel said certificate of sale in the manner provided by subdivision 5, provided that upon recommendation of the county board, and where the circumstances are such that the commissioner of revenue after investigation is satisfied that the purchaser has made every effort reasonable to make payment of both the annual installment and said taxes, and that there has been no willful neglect on the part of the purchaser in meeting these obligations, then the commissioner of revenue may extend the time for the payment for such period as the commissioner may deem warranted, not to exceed one year. On payment in full of the purchase price, appropriate conveyance in fee, in such form as may be prescribed by the attorney general, shall be issued by the commissioner of revenue, which conveyance must be recorded by the county and shall have the force and effect of a patent from the state subject to easements and restrictions of record at the date of the tax judgment sale, including, but without limitation, permits for telephone and electric power lines either by underground cable or conduit or otherwise, sewer and water lines, highways, railroads, and pipe lines for gas, liquids, or solids in suspension.

new text begin(b) The commissioner of revenue shall issue an appropriate conveyance in fee when approval from the county auditor is given based upon written confirmation from a licensed closing agent, title insurer, or title insurance agent as specified in section 82.641. For purposes of this paragraph, "written confirmation" means a written commitment or approval that the funding for the conveyance is held in an escrow account available for disbursement upon delivery of a conveyance. The conveyance issued by the commissioner of revenue shall not be effective as a conveyance until it is recorded. The conveyance shall be issued to the county auditor where the land is located. Upon receipt of the conveyance, the county auditor shall hold the conveyance until the conveyance is requested from a licensed closing agent, title insurer, or title insurance agent to settle and close on the conveyance. If a request for the conveyance is not made within 30 days of the date the conveyance is issued by the commissioner of revenue, the county auditor shall return the conveyance to the commissioner. If the conveyance is delivered to the licensed closing agent, title insurer, or title insurance agent and the closing does not occur within ten days of the request, the licensed closing agent, title insurer, or title insurance agent shall immediately return the conveyance to the county auditor and, upon receipt, the county auditor shall return the conveyance to the commissioner of revenue. The commissioner of revenue shall cancel and destroy all conveyances returned by the county auditor pursuant to this subdivision. The licensed closing agent, title insurer, or title insurance agent must promptly record the conveyance after the closing and must deliver an attested or certified copy to the county auditor and to the grantee or grantees named on the conveyance.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for conveyances issued by the commissioner of revenue after December 31, 2018.new text end

Sec. 18.

Subd. 13.

Property taxes payable.

"Property taxes payable" means the property tax exclusive of special assessments, penalties, and interest payable on a claimant's homestead after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2, and any other state paid property tax credits in any calendar year, and after any refund claimed and allowable under section 290A.04, subdivision 2h, that is first payable in the year that the property tax is payable. In the case of a claimant who makes ground lease payments, "property taxes payable" includes the amount of the payments directly attributable to the property taxes assessed against the parcel on which the house is located. Regardless of the limitations in section 280A(c)(5) of the Internal Revenue Code, "property taxes payable" must be apportioned or reduced for the use of a portion of the claimant's homestead for a business purpose if the claimant deducts any business depreciation expenses for the use of a portion of the homestead or deducts expenses under section 280A of the Internal Revenue Code for a business operated in the claimant's homestead. For homesteads which are manufactured homes as defined in section 273.125, subdivision 8, deleted text beginand for homesteads which aredeleted text endnew text begin including manufactured homes located in a manufactured home community owned by a cooperative organized under chapter 308A or 308B, andnew text end park trailers taxed as manufactured homes under section 168.012, subdivision 9, "property taxes payable" shall also include 17 percent of the gross rent paid in the preceding year for the site on which the homestead is located. When a homestead is owned by two or more persons as joint tenants or tenants in common, such tenants shall determine between them which tenant may claim the property taxes payable on the homestead. If they are unable to agree, the matter shall be referred to the commissioner of revenue whose decision shall be final. Property taxes are considered payable in the year prescribed by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have owned and occupied the homestead on January 2 of the year in which the tax is payable and (i) the property must have been classified as homestead property pursuant to section 273.124, on or before December 15 of the assessment year to which the "property taxes payable" relate; or (ii) the claimant must provide documentation from the local assessor that application for homestead classification has been made on or before December 15 of the year in which the "property taxes payable" were payable and that the assessor has approved the application.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with claims for taxes payable in 2019.new text end

Sec. 19.

Subdivision 1.

Initial application.

(a) A taxpayer meeting the program qualifications under section 290B.03 may apply to the commissioner of revenue for the deferral of taxes. Applications are due on or before deleted text beginJulydeleted text endnew text begin Novembernew text end 1 for deferral of any of the following year's property taxes. new text beginA taxpayer may request an early notification of approval or denial at any time. The commissioner must notify a taxpayer in writing of the reasons for an application denial and that the application may be amended and resubmitted by the due date specified in this subdivision. new text endA taxpayer may apply in the year in which the taxpayer becomes 65 years old, provided that no deferral of property taxes will be made until the calendar year after the taxpayer becomes 65 years old. The application, which shall be prescribed by the commissioner of revenue, shall include the following items and any other information which the commissioner deems necessary:

(1) the name, address, and Social Security number of the owner or owners;

(2) a copy of the property tax statement for the current payable year for the homesteaded property;

(3) the initial year of ownership and occupancy as a homestead;

(4) the owner's household income for the previous calendar year; and

(5) information on any mortgage loans or other amounts secured by mortgages or other liens against the property, for which purpose the commissioner may require the applicant to provide a copy of the mortgage note, the mortgage, or a statement of the balance owing on the mortgage loan provided by the mortgage holder. The commissioner may require the appropriate documents in connection with obtaining and confirming information on unpaid amounts secured by other liens.

The application must state that program participation is voluntary. The application must also state that the deferred amount depends directly on the applicant's household income, and that program participation includes authorization for the annual deferred amount, the cumulative deferral and interest that appear on each year's notice prepared by the county under subdivision 6, is public data.

The application must state that program participants may claim the property tax refund based on the full amount of property taxes eligible for the refund, including any deferred amounts. The application must also state that property tax refunds will be used to offset any deferral and interest under this program, and that any other amounts subject to revenue recapture under section 270A.03, subdivision 7, will also be used to offset any deferral and interest under this program.

(b) As part of the initial application process, the commissioner may require the applicant to obtain at the applicant's own cost and submit:

(1) if the property is registered property under chapter 508 or 508A, a copy of the original certificate of title in the possession of the county registrar of titles (sometimes referred to as "condition of register"); or

(2) if the property is abstract property, a report prepared by a licensed abstracter showing the last deed and any unsatisfied mortgages, liens, judgments, and state and federal tax lien notices which were recorded on or after the date of that last deed with respect to the property or to the applicant.

The certificate or report under clauses (1) and (2) need not include references to any documents filed or recorded more than 40 years prior to the date of the certification or report. The certification or report must be as of a date not more than 30 days prior to submission of the application.

The commissioner may also require the county recorder or county registrar of the county where the property is located to provide copies of recorded documents related to the applicant or the property, for which the recorder or registrar shall not charge a fee. The commissioner may use any information available to determine or verify eligibility under this section. The household income from the application is private data on individuals as defined in section 13.02, subdivision 12.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for applications for deferral of taxes payable in 2019 and thereafter.new text end

Sec. 20.

Subd. 4.

Restriction.

The tax reductions provided by this section shall not apply to (1) a facility the primary purpose of which is one of the following: deleted text beginretail food and beverage services, automobile sales or service, ordeleted text end the provision of recreation or entertainment, or a private or commercial golf course, country club, massage parlor, tennis club, skating facility including roller skating, skateboard, and ice skating, racquet sports facility, including any handball or racquetball court, hot tub facility, suntan facility, or racetrack; (2) property of a public utility; (3) property used in the operation of a financial institution; (4) property owned by a fraternal or veterans' organization; or (5) deleted text beginproperty of a business operating under a franchise agreement that requires the business to be located in the state; except that tax reductions may be provided to a retail food or beverage facility or an automobile sales or service facility, or a businessdeleted text endnew text begin a retail food or beverage facilitynew text end operating under a franchise agreement that requires the business to be located in this state deleted text beginexcept for such a franchised retail food or beverage facilitydeleted text end.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and confirms the legislative intent of the amendment made by Laws 2012, chapter 294, article 2, section 25.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2019.new text end

Sec. 22.

Minnesota Statutes 2016, section 469.1812, is amended by adding a subdivision to read:

new text beginSubd. 2a.new text end

new text beginMedical facility.new text end

new text begin"Medical facility" means:new text end

new text begin(1) an office, clinic, building, or portion of a building, the primary use of which is the provision of primary or specialty health care services to patients on an outpatient basis, by one or more state-licensed or registered health care providers;new text end

new text begin(2) a birth center licensed under section 144.615;new text end

new text begin(3) a hospital licensed under sections 144.50 to 144.56;new text end

new text begin(4) an urgent care clinic which provides treatment for medical conditions that are not life-threatening or potentially permanently disabling and do not require critical or emergency interventions; ornew text end

new text begin(5) an outpatient surgical center licensed under section 144.55.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment for taxes payable beginning in 2019 and for sales and purchases made after June 30, 2018.new text end

Sec. 23.

Minnesota Statutes 2016, section 469.1812, is amended by adding a subdivision to read:

new text beginSubd. 2b.new text end

new text beginMedically underserved county.new text end

new text begin"Medically underserved county" means a county, any portion of which is designated by the federal secretary of health and human services as a medically underserved area or medically underserved population, as defined under Code of Federal Regulations, title 42, section 51C.102. By December 15 of each year, the commissioner of health must certify to the commissioner of revenue the counties that are medically underserved. By December 31 of each year, the commissioner of revenue must certify the list of medically underserved counties to county assessors, for assessments in the following year.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with assessment year 2018 for taxes payable in 2019. For assessment year 2018, the certification required to be made by the commissioner of health must be made by June 1, 2018, and the certification required to be made by the commissioner of revenue must be made by June 15, 2018.new text end

Sec. 24.

new text begin[469.1817] MEDICAL FACILITY TAX ABATEMENT.new text end

new text beginSubdivision 1.new text end

new text beginQualification.new text end

new text beginThe state general tax under section 275.025 must be abated by the county for any property or portion thereof containing a medical facility that has been granted an abatement under section 469.1813, provided that:new text end

new text begin(1) the facility is located in a medically underserved county at the time the abatement resolution is adopted;new text end

new text begin(2) the facility is not located in a metropolitan county as defined under section 473.121, subdivision 4;new text end

new text begin(3) the resolution of one or more governing bodies granting the abatement specifies that the facility addresses an underserved need for medical services in the area; andnew text end

new text begin(4) both the county and the city or town are abating all taxes on the property containing the facility for at least 15 years under section 469.1813, subdivision 2.new text end

new text beginSubd. 2.new text end

new text beginApplication.new text end

new text beginA taxpayer seeking an abatement under this section must file an application with the county assessor by March 1 of the first assessment year for which the abatement is sought, on a form prescribed by the commissioner of revenue.new text end

new text beginSubd. 3.new text end

new text beginDuration.new text end

new text beginThe state general tax is abated for 15 years.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective beginning with taxes payable in 2019.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and applies to any agricultural preserve where the previously required eight-year termination period under Minnesota Statutes, section 473H.08, has not yet expired.new text end

Sec. 26.

Minnesota Statutes 2016, section 473H.08, is amended by adding a subdivision to read:

new text beginSubd. 3a.new text end

new text beginExpiration for park and trail purposes.new text end

new text begin(a) An agricultural preserve expires immediately when a state agency or other governmental unit purchases the property or obtains an easement over the property for the purpose of creating or expanding a public trail or public park. This subdivision applies only to the portion of the agricultural preserve acquired for trail or park purposes, and any portion of the property not acquired for trail or park purposes shall remain an agricultural preserve, regardless if the remaining total acreage is less than 40 acres.new text end

new text begin(b) The acquiring state agency or governmental unit shall give notice of the expiration under paragraph (a) to the authority. The notice must specify the portion of the property being removed from the agricultural preserve and the date on which that portion expires.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and applies to any agricultural preserve where the previously required eight-year termination period under Minnesota Statutes, section 473H.08, has not yet expired.new text end

Sec. 27.

Subd. 4.

Notice to others.

Upon receipt of the notice provided in subdivision 2new text begin or 3anew text end, or upon notice served by the authority as provided in subdivision 3, the authority shall forward the original notice to the county recorder for recording, or to the registrar of titles if the land is registered, and shall notify the county auditor, county assessor, the Metropolitan Council, and the county soil and water conservation district of the date of expiration. Designation as an agricultural preserve and all benefits and limitations accruing through sections 473H.02 to 473H.17 for the preserve shall cease on the date of expiration. The restrictive covenant contained in the application shall terminate on the date of expiration.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment and applies to any agricultural preserve where the previously required eight-year termination period under Minnesota Statutes, section 473H.08, has not yet expired.new text end

Sec. 28.

Subd. 13.

Certified aid adjustments.

deleted text begin(a) A city that received an aid base increase under Minnesota Statutes 2012, section 477A.011, subdivision 36, paragraph (e), shall have its total aid under subdivision 9 increased by an amount equal to $150,000 for aids payable in 2014 through 2018.deleted text end

deleted text begin(b)deleted text endnew text begin (a)new text end A city that received an aid base increase under new text beginMinnesota Statutes 2012, new text endsection 477A.011, subdivision 36, paragraph (r), shall have its total aid under subdivision 9 increased by an amount equal to $160,000 for aids payable in 2014 and thereafter.

deleted text begin(c) A city that received a temporary aid increase under Minnesota Statutes 2012, section 477A.011, subdivision 36, paragraph (o), shall have its total aid under subdivision 9 increased by an amount equal to $1,000,000 for aids payable in 2014 only.deleted text end

new text begin(b) For aids payable in 2019 only, a city shall have its total aid under subdivision 9 increased by an amount equal to its aid decrease between aids payable in 2016 and 2017 if:new text end

new text begin(1) the city's aid decreased by more than $50,000 between aids payable in 2016 and 2017 under this section; andnew text end

new text begin(2) the city's unmet need amount calculated for aids payable in 2017 exceeded its aids payable in 2016.new text end

new text begin(c) The city of Lilydale shall have its total aid under subdivision 9 increased by $150,000 for aids payable in 2019 only.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for aids payable in calendar year 2019.new text end

Sec. 30.

Subdivision 1.

Agreement.

The city of Cloquet and Perch Lake Township, by resolution of each of their governing bodies, may establish the Cloquet Area Fire and Ambulance new text beginSpecial new text endTaxing District for the purpose of providing fire or ambulance services, or both, throughout the district. In this section, "municipality" means home rule charter and statutory cities, towns, and Indian tribes. The district may exercise all the powers relating to fire and ambulance services of the municipalities that receive fire or ambulance services, or both, from the district. Upon application, any other municipality may join the district with the agreement of the municipalities that comprise the district at the time of its application to join.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective upon compliance by the Cloquet Area Fire and Ambulance Special Taxing District Board with Minnesota Statutes, section 645.021, subdivision 3.new text end

Sec. 31.

Subd. 2.

Board.

The Cloquet Area Fire and Ambulance new text beginSpecial new text endTaxing District Board is governed by a board made up initially of one or more elected officials of the governing body of each participating municipality in the proportions set out in the establishing resolution, subject to change as provided in the district's charter, if any, or in the district's bylaws. Each municipality's representatives serve at the pleasure of that municipality's governing body.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective upon compliance by the Cloquet Area Fire and Ambulance Special Taxing District Board with Minnesota Statutes, section 645.021, subdivision 3.new text end

Sec. 32.

Subd. 3.

Tax.

The district board may impose a property tax on taxable property as provided in this subdivisionnew text begin to pay the costs of providing fire or ambulance services, or both, throughout the districtnew text end. The board shall annually determine the total amount of the levy that is attributable to the cost of providing fire services and the cost of providing ambulance services within the primary service area. For those municipalities that only receive ambulance services, the costs for the provision of ambulance services shall be levied against taxable property within those municipalities at a rate necessary not to exceed 0.019 percent of the estimated market value. For those municipalities that receive both fire and ambulance services, the tax shall be imposed at a rate that does not exceed 0.2835 percent of estimated market value.

When a member municipality opts to receive fire service from the district or an additional municipality becomes a member of the district, the cost of providing fire services to that community shall be determined by the board and added to the maximum levy amount.

Each county auditor of a county that contains a municipality subject to the tax under this section must collect the tax and pay it to the Fire and Ambulance Special Taxing District. The district may also impose other fees or charges as allowed by law for the provision of fire and ambulance services.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective upon compliance by the Cloquet Area Fire and Ambulance Special Taxing District Board with Minnesota Statutes, section 645.021, subdivision 3.new text end

Sec. 33.

Subd. 4.

Public indebtedness.

The district may incur debt in the manner provided for new text beginin Minnesota Statutes, chapter 475, and the district shall be considered new text enda municipality deleted text beginby Minnesota Statutes, chapter 475, when necessary to accomplish its duties.deleted text endnew text begin, as defined in Minnesota Statutes, sections 475.51, subdivision 2, and 475.521, subdivision 1, paragraph (c), and may issue certificates of indebtedness or capital notes in the manner provided for a city under Minnesota Statutes, section 412.301, when necessary to accomplish its duties. Any tax levied to pay debt of the district shall be levied in the amounts required and in accordance with Minnesota Statutes, section 475.61. The debt service for debt, the proceeds of which financed capital costs for ambulance service, shall be levied against taxable property within those municipalities in the primary service area. The debt service for debt, the proceeds of which financed capital costs for fire service, shall be levied against taxable property within those municipalities receiving fire services.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective upon compliance by the Cloquet Area Fire and Ambulance Special Taxing District Board with Minnesota Statutes, section 645.021, subdivision 3.new text end

Sec. 34.

Subd. 5.

Withdrawal.

Notice of intent to withdraw from participation in the district may be given only in the month of January, with a minimum of twelve months notice of intent to withdraw. Withdrawal becomes effective for taxes levied new text beginpursuant to subdivision 3 new text endin the year when the notice is given. new text beginA property tax levied by the district on taxable property located in a withdrawing municipality to make debt service payments for obligations issued by the district pursuant to subdivision 4 shall remain in effect until the obligations outstanding on the date of withdrawal are satisfied, including any property tax levied in connection with a refunding of such obligations. new text endThe district and its members may develop and agree upon new text beginother new text endcontinuing obligations after withdrawal of a municipality.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective upon compliance by the Cloquet Area Fire and Ambulance Special Taxing District Board with Minnesota Statutes, section 645.021, subdivision 3.new text end

Sec. 35.

EFFECTIVE DATE; APPLICATION.

This section is effective for applications new text beginand certifications new text endmade in 2018 and thereafter, except the repeal of the exclusion of land under item (iii) is effective retroactively for payments due under Minnesota Statutes, section 290C.08, beginning for payments due to be made in 2014. In order to qualify for retroactive payments, the following requirements must be met: (1) the owner of land exceeding 60,000 acres that is subject to a single conservation easement funded under Minnesota Statutes, section 97A.056 or a comparable permanent easement conveyed to a governmental or nonprofit entity, must submit an application to the commissioner of revenue, in a form and manner and at a time acceptable to the commissioner, establishing that the affected property and its use met the requirement of Minnesota Statutes, chapter 290C, as amended by this section; (2) the owner and each county in which the land is located must certify to the commissioner that no petitions challenging the market value of the property are pending under Minnesota Statutes, chapter 278; and (3) the requirements of clauses (1) and (2) must be satisfied by October 1, 2017. No interest accrues on payment under this section for periods before November 1, 2017.

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

new text beginA veteran who was first notified by the United States Department of Veterans Affairs after July 1, 2017, but before November 1, 2017, as having a total (100 percent) and permanent disability effective prior to July 1, 2016, but who did not apply to the assessor by July 1, 2016, for a benefit in Minnesota Statutes, section 273.13, subdivision 34, paragraph (b), for assessment year 2016, and who did not apply to the assessor by July 1, 2017, for the benefit in Minnesota Statutes, section 273.13, subdivision 34, paragraph (b), for assessment year 2017, may apply to the county assessor for a refund of taxes paid in 2017 and 2018 if the veteran otherwise would have qualified for the exclusion in those years. To qualify for a refund, a property owner must apply to the assessor by November 1, 2018, and must have paid all tax due in 2017 and 2018. After verifying that the applicant qualified for an exclusion in 2016 and 2017, the county assessor must notify the county auditor, and the auditor must recalculate the taxes on the property for taxes payable in 2017 and 2018 based on the exclusion. The county treasurer must then issue a refund of tax paid in 2017 and 2018 equal to the difference between the taxes as initially calculated for each taxes payable year and the taxes based on the value remaining after the exclusion.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective for refund applications received in 2018, for refunds of tax paid in 2017 and 2018.new text end

Sec. 37. new text beginSCHOOL PROPERTY TAX REFORM.new text end

new text begin(a) A school property tax working group is established as provided in this section. The goals of the working group are to develop one or more legislative proposals for reform of Minnesota's property tax system that would:new text end

new text begin(1) evaluate the farmland tax burden from the costs of school capital investments;new text end

new text begin(2) simplify the tax system used for school district levies;new text end

new text begin(3) coordinate interactions with the state general levy; andnew text end

new text begin(4) accomplish the objectives of this paragraph with optimal levels of state aid and local property tax.new text end

new text begin(b) The 16-member working group shall consist of the following members:new text end

new text begin(1) two state representatives, both appointed by the chair of the house of representatives Taxes Committee, one from the majority party and one from the largest minority party;new text end

new text begin(2) two state representatives, both appointed by the chair of the house of representatives Education Finance Committee, one from the majority party and one from the largest minority party;new text end

new text begin(3) four senators appointed by the Subcommittee on Committees of the Senate Rules and Administration Committee, two from the majority party and two from the largest minority party;new text end

new text begin(4) one person appointed by the Minnesota School Boards Association;new text end

new text begin(5) one person appointed by the Minnesota Rural Education Association;new text end

new text begin(6) one person appointed by the Association of Metropolitan School Districts;new text end

new text begin(7) one person appointed by Schools for Equity in Education;new text end

new text begin(8) one person appointed by the Minnesota Farm Bureau;new text end

new text begin(9) one person appointed by the Minnesota Farmers Union;new text end

new text begin(10) one person appointed by the Minnesota Chamber of Commerce; andnew text end

new text begin(11) one person appointed by Minnesota Lakes and Rivers Advocates.new text end

new text begin(c) The commissioner of revenue and the commissioner of education, or their designees, shall serve as ex-officio members of the working group.new text end

new text begin(d) All appointments must be made before July 1, 2018. The majority party appointee of the house of representatives Taxes Committee chair shall chair the initial meeting, and the working group shall elect a chair at that initial meeting. The working group will meet at the call of the chair. Members of the working group shall serve without compensation. The commissioner of revenue must provide administrative support to the working group. Minnesota Statutes, chapter 13D, does not apply to meetings of the working group. Meetings of the working group must be open to the public and the working group must provide notice of a meeting to potentially interested persons at least five days before the meeting. A meeting of the working group occurs when a quorum is present.new text end

new text begin(e) The working group shall make its advisory recommendations to the chairs of the house of representatives and senate Taxes and Education Finance Committees on or before January 1, 2019, at which time the working group shall be finished and this section expires.new text end

new text beginEFFECTIVE DATE.new text end

new text beginThis section is effective the day following final enactment.new text end

ARTICLE 6

PUBLIC FINANCE

Section 1.

Subd. 2.

Interest.

(a) Interest is an additional drainage lien on all property until paid. The interest rate on the drainage lien principal from the date the drainage lien statement is recorded must be set by the board but may not exceed the rate determined by the state court administrator for judgments under section 549.09new text begin, or six percent, whichever is greaternew text end.

(b) Before the tax lists for the year are given to the county treasurer, the auditor shall compute the interest on the unpaid balance of the drainage lien at the rate set by the board. The amount of interest must be computed on the entire unpaid principal from the date the drainage lien was recorded to August 15 of the next calendar year, and afterwards from August 15 to August 15 of each year.

(c) Interest is due and payable after November 1 of each year the drainage lien principal or interest is due and unpaid.

Sec. 2.

Minnesota Statutes 2016, section 471.831, is amended to read:

471.831 MUNICIPALITY MAY FILE BANKRUPTCY PETITION.

Subdivision 1.

Any relief under bankruptcy code.

A municipality, as defined in subdivision 2, may file a petition and seek any relief available to it under United States Code, title 11, as amended deleted text beginthrough December 31, 1996deleted text end.

Subd. 2.

Municipality defined.

In this section, "municipality" means a municipality as defined in United States Code, title 11, section 101, as amended deleted text beginthrough December 31, 1996deleted text end, but limited to a county, statutory or home rule charter city, or town; or a housing and redevelopment authority, economic development authority, or rural development financing authority established under chapter 469, a home rule charter, or special law.

Sec. 3.

Subd. 6.

Limitation; light rail transit.

The council is prohibited from expending any proceeds from certificates of indebtedness, bonds, or other obligations under deleted text beginthis sectiondeleted text endnew text beginsubdivision 1unew text end for project development, land acquisition, or construction to (1) establish a light rail transit line; or (2) expand a light rail transit line, including by extending a line or adding additional stops.

Sec. 4.

Subd. 22b.

Public facilities project.

"Public facilities project" means any publicly owned facility, or new text begina new text endfacility deleted text beginowned by a nonprofit organizationdeleted text end that is used for district heating or cooling, new text beginwhether publicly or privately owned, new text endthat is eligible to be financed with the proceeds of public facilities bonds as defined under section 474A.02, subdivision 23a.

Subdivision 1.

Definitions.

(b) "Capital improvement" means acquisition or betterment of public lands, buildings or other improvements for the purpose of a city hall, town hall, library, public safety facility, and public works facility. An improvement must have an expected useful life of five years or more to qualify. Capital improvement does not include light rail transit or any activity related to it, or a park, road, bridge, administrative building other than a city or town hall, or land for any of those facilities. For purposes of this section, "capital improvement" includes expenditures for purposes described in this paragraph that have been incurred by a municipality before approval of a capital improvement plan, if such expenditures are included in a capital improvement plan approved on or before the date of the public hearing under subdivision 2 regarding issuance of bonds for such expenditures.

(c) "Municipality" means a home rule charter or statutory city or a town deleted text begindescribed in section 368.01, subdivision 1 or 1adeleted text end.

ARTICLE 7

MISCELLANEOUS

Section 1.

(a) All occupation taxes paid by persons, copartnerships, companies, joint stock companies, corporations, and associations, however or for whatever purpose organized, engaged in the business of mining or producing iron ore or other ores, when collected shall be apportioned and distributed in accordance with the Constitution of the state of Minnesota, article X, section 3, in the manner following: 90 percent shall be deposited in the state treasury and credited to the general fund of which four-ninths shall be used for the support of elementary and secondary schools; and ten percent of the proceeds of the tax imposed by this section shall be deposited in the state treasury and credited to the general fund for the general support of the university.

(b) Of the money apportioned to the general fund by this sectionnew text begin, the following allocations must be madenew text end:

(1) there is annually appropriated and credited to the mining environmental and regulatory account in the special revenue fund an amount equal to that which would have been generated by a 2-1/2 cent tax imposed by section 298.24 on each taxable ton produced in the preceding calendar year. Money in the mining environmental and regulatory account is appropriated annually to the commissioner of natural resources to fund agency staff to work on environmental issues and provide regulatory services for ferrous and nonferrous mining operations in this state. Payment to the mining environmental and regulatory account shall be made by July 1 annually. The commissioner of natural resources shall execute an interagency agreement with the Pollution Control Agency to assist with the provision of environmental regulatory services such as monitoring and permitting required for ferrous and nonferrous mining operations;

(2) there is annually appropriated and credited to the Iron Range resources and rehabilitation account in the special revenue fund an amount equal to that which would have been generated by a 1.5 cent tax imposed by section 298.24 on each taxable ton produced in the preceding calendar year, to be expended for the purposes of section 298.22new text begin. The money appropriated shall be used (i) to provide environmental development grants to local governments located within any county in region 3 as defined in governor's executive order number 60, issued on June 12, 1970, that does not contain a municipality qualifying pursuant to section 273.134, paragraph (b), or (ii) to provide economic development loans or grants to businesses located within any such county, provided that the county board or an advisory group appointed by the county board to provide recommendations on economic development shall make recommendations to the commissioner of Iron Range resources and rehabilitation regarding the loans. Of the money allocated to Koochiching County, one-third must be paid to the Koochiching County Economic Development Commission. Payment to the Iron Range resources and rehabilitation account shall be made by May 15 annuallynew text end; and

(3) there is annually appropriated and credited to the Iron Range resources and rehabilitation account in the special revenue fund for transfer to the Iron Range school consolidation and cooperatively operated school account under section 298.28, subdivision 7a, an amount equal to that which would have been generated by a six cent tax imposed by section 298.24 on each taxable ton produced in the preceding calendar year. Payment to the Iron Range resources and rehabilitation account shall be made by May 15 annually.

(c) deleted text beginThe money appropriated pursuant to paragraph (b), clause (2), shall be used (i) to provide environmental development grants to local governments located within any county in region 3 as defined in governor's executive order number 60, issued on June 12, 1970, which does not contain a municipality qualifying pursuant to section 273.134, paragraph (b), or (ii) to provide economic development loans or grants to businesses located within any such county, provided that the county board or an advisory group appointed by the county board to provide recommendations on economic development shall make recommendations to the commissioner of Iron Range resources and rehabilitation regarding the loans. Payment to the Iron Range resources and rehabilitation account shall be made by May 15 annually.deleted text endnew text begin After the allocations are made under paragraph (b), any amount remaining in the general fund, of the money apportioned to the general fund under this section in the current year, shall be refunded by the commissioner of revenue as provided. By May 15 annually, the commissioner shall issue a refund to each producer equal to the amount of tax paid by that producer in the current year under section 298.01, as compared to the total amount of tax paid in the current year under section 298.01 by all producers, provided that a producer shall not be eligible for a refund under this section in an amount greater than the amount of tax paid by that producer in the current year. The total amount of refunds issued under this paragraph in any year shall not exceed $5,000,000.new text end

deleted text begin(d) Of the money allocated to Koochiching County, one-third must be paid to the Koochiching County Economic Development Commission.deleted text end